City Eye: Property prices dance to the beat of the new rock 'n' roll

Those of us of literary bent pretension reach for our metaphorical revolvers when we see a cliché. If it's something as trite as "the new rock 'n' roll", a gun just isn't enough. Pass the howitzer, please.

But indulge me here. The other day I was able to identify the "new rock 'n' roll" in the UK's superheated property market, and the new rock 'n' roll stars as the people who will sustain the silly levels of London property prices. Among these is David Tye, co-founder of the aggressively expanding Rugby Estates, who once almost sold the house he was living in to boyhood hero Jimmy Page of Led Zeppelin.

But there just aren't enough rock stars around to keep South Kensington, Chelsea and Notting Hill prices rising at a compound rate of 30 per cent or so, year in, year out. So who are the new rock 'n' rollers? Why, private equity and hedge fund managers, of course.

The pseudo-Calvinistic rumblings from Gordon Brown about private equity are less explicit and shrill than the recent call from Labour veteran Michael Meacher for "something to be done" - but more ominous. Yet it's difficult to see what can be sensibly done. Heaven knows, Chelsea tractor-driving bottle blondes are the natural enemy of Labour, but the 4x4's proliferate.

Neither Tye nor I could work out how to do this in a way that wouldn't embarrass Stalin's enforcers. All of which, subject to a Whitehall mandarin having an idea that won't ruin the entire financial services sector, is good news for homeowners in postcode heaven: SW1, SW3, SW7 and the like.

But it seems the already alarming estimate of 30 per cent compound growth may be conservative. Here's anonymous testimony from one of the biggest and best mortgage brokers in the country: "I have two clients - one a hedge fund manager, the other in private equity - who each bought a property last year in different parts of central London; combined in value, they came to £6.86m. The deals went through in June and July last year. They both stayed less than 10 nights in their properties and have sold to vendors, who approached them, for a total of £14.9m. In less than a year, that made for a return of 73 per cent."

So much for cooling demand. But what next? With many central London properties selling instantly at their ever-rising asking prices, are we on the verge of a catastrophic collapse at the top end? Or is this a sign that the best pull in attract the wealthiest international occupants, so that locals not involved in private equity or hedge funds are forced out to the mid-priced ghettos of Fulham, Maida Vale and Camberwell?

Let's hope it's the latter rather than a property crash. The ghetto scenario will win, subject to the under-rated risk of a terrorist attack or its fiscal equivalent: a clumsy assault on private equity and hedge fund managers.

A sight for sore 'i's

Summertime Sex in the City (gadget version) will, I am reliably informed, take the form of the iPhone, soon due for launch. As a technological dinosaur, I've only just sorted out music and pictures on my iPod, so the thought of having something that does everything but fly fills me with dread. I'm not sure how many fund managers will want one either, but - and this is not a stock tip - they may want to get hold of shares in Wolfson Microelectronics, whose audio chip is inside the little beast.

martin@martinfdbaker.com