UK investors retreating to property, once again

Doug McKinlay | Britain On View | Getty Images

How many U.K. seaside resorts claim to be "Chelsea on Sea"? By my reckoning there are at least a dozen in Cornwall and Devon alone. One of them is Salcombe, which is where I was holidaying last week, and which has more Chelsea Tractors clogging up the narrow streets than the Chelsea borough of London itself.

Why is this relevant to you? It's not actually, but a couple of observations struck me which are probably worth having a think about.

(Read more: No bubble says Nationwide, as UK housing hits 5-year high)

To be honest, I never can resist a peak at local property prices when I'm off somewhere nice. And prices down in Salcombe are stratospheric. A detached six- bedroom house is asking for offers in excess of £5,000,000 ($7,750,000). Elsewhere, a five-bedroom semi is on the market for just under £3,000,000. These are at the top end of local prices but are pretty indicative of a niche housing market that has only ever gone one way - up!

Yes, there is a lack of supply and a host of potential buyers who will always want to have a second home here regardless of the broader economic landscape. But those are prices which are surging without any international buyers distorting the market, unlike back in south west London.

Sure it's a wonderful place to stay, none better when the sun is out and the sailing is good but is the Salcombe property bubble also being propelled by fear? A fear amongst wealthy Brits that deposited cash is next to useless for return these days and a fear that in a worst-case scenario the really rich will lose most of their money, potentially all but the guaranteed £85k per account if we get a repeat of Northern Rock et al? Once again Englishmen are retreating to bricks and mortar for safety even if the prices are sky high.

(Read more: UK housing recovery spurs 'bubble' warnings)

Think about it. Those lucky few of you holding seriously big cash sums now, have spent the last couple of years on the verge of panic that the banking crisis will rear its head again and, as shown in Cyprus, big deposit holders could be the next in the firing line if and when the authorities admit they've run out of firepower in the next European hot spot. Who wouldn't want to own an over-priced Devon cottage when the alternative is much darker if we get more incompetence in the handling of Europe's economy.

Hysteria? Maybe. Doom-mongering? Not really. It's how the super rich have always held on to their money throughout the generations. Owning assets and having a healthy distrust for the banking system.

All I'm saying is: just remember there are two reasons why people buy property at inflated prices - confidence and fear can go hand in hand.

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