As the Financial Times recently observed, Britain’s State religion is house prices. We worship them. More than any other factor, the rise in the value of property accounted for the feel-good years of the Blair regime. A house became not simply a place to live, but a speculative asset — the easiest way to make money when cheap credit was plentiful and the house prices kept rising. Dozens of newspaper articles and television shows taught people how to become property entrepreneurs. You took a big mortgage on an unpromising house, spent six months refurbishing it (or at least making it look nicer), and then returned it to the ever-rising market at a profit that would easily cover your costs. What could be easier? Why didn’t everybody do it? Especially when the stupid banks were eager to lend more than the value of the house and, in the case of the so-called buy-to-let mortgage, the stupid government allowed mortgage repayments to be set as an expense against income, so that you could buy a house, fill it with tenants and pay very little tax on the rent.

Surveying the ruins of the world economy, one sees where this has led. But at the time it felt good. Even those of us who lacked the speculative instinct and continued to treat our houses as homes rather than tradable goods — even we were comforted by the thought that each passing month made us richer. We checked estate agents’ windows every week and swopped prices at dinner parties. A quite ordinary London house — mine, for example — that cost £200,000 in 1992 was 15 years later worth £1.2 million. At one level, this was disturbing: it didn’t make sense. But mainly it was thrilling: we had all become alchemists, turning base bricks and mortar into gold. And then suddenly we hadn’t. ‘RETURN OF THE £100,000 LONDON HOUSE’ said a newspaper placard outside my local newsagent’s this week, implying shock that such a small sum of money (in fact, it equals four times the British average annual wage) could now purchase a small flat in an undesirable part of the city.

The state religion is now riddled with atheists. Prices are falling steeply, and nobody knows when it will stop. In London, they’ve dropped 14 per cent over the past year and are expected to fall by the same proportion over the next. Britain’s wishful thinkers — who include the government as well as estate agents — like to draw financial graphs in the shape of Vs, with a steep decline (the present) followed by a tiny bottom (late 2009) and then a sharp rise (onwards and upwards from 2010). So far as houses are concerned, the future may not look like that. It may look like an L. As an investment banker put it to me, “Just because you’ve reached the bottom doesn’t mean you won’t stay there.” Houses in 2016 might still be worth only half their 2007 values. This is good news for anyone without a house who wants to buy one, and therefore a redistributive silver lining to the overall economic cloud, but for those of us (like me) who were hoping that their house values could be translated into a capital sum — that might, for example fund a pension — the outlook is rather grim. (As to people who bought at the height of the boom, they might as well shoot themselves.)

Still, as an older generation was fond of saying, there are always people worse off than you. There are at least three dozen estate agents’ offices within a mile of where I live, and when I look into their windows these days I see rows of empty desks where the dealers used to sit, with perhaps one young man in a suit at the desk furthest off, pretending to look busy on the telephone. Nobody is buying and only the hardest-pressed are selling. All across the country the picture is the same. In Ireland, it is even worse. An Irishman I met this week told me a joke, as Irishmen tend to do. “Why doesn’t an estate agent look out of his window in the morning? Because then he’d have nothing to do in the afternoon.” Not being estate agents, who in Britain are almost as disliked as journalists and politicians, we laughed.

*******

Aside from the coming of Barak Obama and the departure of George Bush, this has been the most miserable year I can remember. The Arctic ice cap is melting at unexpected speed, the world’s financial system is in a state of nervous collapse, wars of unspeakable cruelty rage in Africa. And then, the icing on this witches’ cake: Mumbai.

One of the heartening things to come out of the Mumbai atrocities — perhaps the only one — was the display of civic determination that the city would recover. Writers wrote of Mumbai’s unconquerable spirit, its energy, its magnet-like ability to attract the feistiest people in India — migrants of different faiths and languages who would rub along together in the same melting pot and treat a dozen free-shooting sadists with the contempt they deserved. I don’t want to deny this portrait, even though it omits the poverty, criminality and corruption that are also prominent parts of Mumbai’s personality. Too much is at stake. On the other hand, it is interesting to consider which cities attract a mythology of comradeship and survival and which cities don’t.

Calcutta has it as well as Mumbai, but do New Delhi and Bangalore? Does anyone talk of ‘the Bangalore spirit’? (In his new travel account, Paul Theroux describes Bangaloreans as ‘pirates with cell phones’.) In America, New York has it — in spades — but does LA or Philadelphia? (To judge from the aftermath of the hurricane, New Orleans certainly doesn’t.) In Britain, Glasgow and Liverpool have it but not Birmingham or Leeds. The city that may have invented it as a coping stratagem for hard times is London.

When Islamist suicide bombers killed 52 London commuters in July, 2005, the city’s transport system closed down and in the evening people had to walk home from work. It was a memorable sight, every pavement filled with subdued and apprehensive crowds trudging towards their families and friends, sometimes over distances of several miles. There was no panic — what would be the point in weeping or tearing your hair? We behaved in the only way we knew how. Politicians and the media, however, translated our everyday pragmatism into an example of a long civic tradition. We were showing the same ‘Blitz spirit’ that had seen London through World War II (and quite a few IRA bombings in the years since). We were not merely calm; we were resolved.

The foundations of this idea of London as a city that would ‘carry on’, no matter the violence rained down on it, date from 1940, when the brilliant film-maker, Humphrey Jennings, made a 10-minute documentary that was designed to enlist pro-British sympathy in the United States of America, then still neutral in the war. Jennings had socialist instincts and his film, London Can Take It, showed ordinary Londoners enduring German air raids with courage and grit. The sound-track matched these scenes with the words of an American broadcaster: “I have watched the people of London live and die... I can assure you, there is no panic, no fear, no despair in London town.”

It can’t have been true. Between September 1940 and May 1941, roughly 20,000 Londoners died in what became known as the Blitz, and many millions more lay fearful every night under the kitchen table and in underground shelters. The film, selective as any piece of fiction, showed no scattered body parts or grieving relatives. But its portrayal became not only what America believed about London but also what London believed about itself. In the words of Jennings’s biographer, Kevin Jackson, London Can Take It remains “one of the few films that have played some small part in changing the course of history”.

Of course, it created a myth. There is no evidence to suggest that Londoners are any more resolute as a group than Madrilenos or Parisians, and in any case there are limits to what stoicism can achieve. The violence must not be too great: nobody, after all, invokes ‘the spirit of Dresden’ or the unquenchable valour of Hiroshima. But in certain circumstances myths are very useful: by upholding them, people tend to obey them. In its civic mythology, Mumbai has the strength to come through.