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Selling the family silver could send the City down the sink

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Some years ago, shortly before his death, Lord Stockton, better known as Harold Macmillan, the former prime minister, rose to deliver his last major speech to the House of Lords. At the height of the panic generated by the energy crisis of the 1970s - a time when the premier had ordered industry to work a three-day week while cabinet ministers urged the populace to learn how to clean their teeth in the dark - his was the voice of moderation. 'In times of financial stress, ' he intoned, 'we should not set about selling the family silver.' Whether Lord Stockton's cautionary words had much direct effect at the time I do not know, but they were widely reported. Even today they have a resonance, albeit based on an uncertain understanding of what an antique expression such as 'family silver' could mean today.

For example, why is it that nobody seems to care nowadays that there is mounting evidence that something akin to 'selling the family silver' is happening in the City of London. There, at the end of the third quarter of 2004, a firm of property agents, Jones Lang LaSalle, published a report which claimed that proceeds from the sale of commercial office buildings in the Square Mile had reached £1.77 billion, a record for a third quarter and only the fourth time that the City's quarterly office sales had topped £1.5 billion.

Following this initial revelation, other sources swiftly came to light and were hastily annualised.

By this means, projections for the whole of 2004, ranging from £5. 5 billion to £6 billion, were soon advanced. Since even the lowest of these estimates represented an all-time record of the order of the £5.3 billion attained in the millennium year of 2000, something had to be said. But what? Clearly the parallel with the millennium year was of no use because it would only waken unpleasant memories of the dot. com bubble, the second greatest financial disaster of the age. In the same way, parallels with the uncertain state of the much larger housing market might destabilise a fragile balance there too. The only acceptable route for the financial commentators to take was also the most uneasy - to treat the new 'silver sale' as good news.

'City office sales head for record £6bn year' was how The Times put it, and the others followed suit.

Or they did until the Sunday Times ran a story asserting that Canary Wharf Group was poised to sell the best part of a billion pounds worth of its Docklands portfolio as well. Added to the City's own property disposals, the Wharf's estimated £800 million shows a quantity and quality of office floor space that could drive property prices down - if it were to come on to the market all at once - let alone see a corner of the bad news story that is waiting to break out some time in 2005, when the broader impact of the 'record sales' dawns on those who work in them.

All that we really know about this state of affairs is that it looks like the house-price saga played with larger units, a kind of tsunami of debt that would overwhelm everything in its path. Next it became a 'hard landing' that only the prudent would survive, and finally a 'soft landing' that would let nearly everyone down gently - provided there was absolutely no panic selling of houses first.

In the motor industry, the need for continuous innovation means that this problem is dealt with by means of the theory of 'sink time', whereby the response to the initial appearance of a new model - which is often surprisingly negative - is allowed time to grow upon the public before a final verdict is given. In the case of the family silver, it may not be house prices, or car designs, but commercial office buildings that will be first to go in 2005.

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