In those iconic Warner Bros cartoons, a regularly repeating theme was Wile E. Coyote chasing an infuriatingly smug Road Runner up a steep escarpment and pursuing him at full speed towards a precarious cliff edge, with a sheer drop beyond.
In his determination to catch the bird, the coyote runs right over the edge but miraculously continues running in mid-air until, some considerable time later, he suddenly realises the ground has disappeared from underneath him and, when that reality dawns, he plummets like a stone into the valley below.
This scenario puts me in mind of the residential property market in 1989/90, when the market suddenly came to a grinding halt after three years of exponential growth. Developers, desperately trying to buy land in a white-hot market were having to factor anticipated inflation into their bids to have any sort of chance to acquire sites and meet targets.
They chased deals at ever-higher values until, just like in the cartoons, the ground just disappeared from underneath them and when they eventually stopped and looked down, they were committed to prices the market couldn’t possibly sustain. The results were catastrophic.
One of my favourite things to do at developer seminars, is hand out to all the delegates a copy of the Halifax price index from 1985 up to the present day, with all the axes and scales in place, the starting index and the current index but the values for each year removed, as shown on the charts below which show the years up to 2016;