House price epiphany PT 1

For the last couple of years, like most of us I’ve been trying to get my head around the question ‘are houses cheap or expensive?’ As an investor / developer with 20 years experience (I started just after university); I have witnessed some pretty dramatic changes in the whole investment market.

When I started, the role model for a landlord was Leonard Rossiter’s comic creation Rigsby. Old school friends used to rib me mercilessly about my aspirations to become one. How times change. I’ve been reliably informed that being a property investor is now pretty ‘hip’ and all I get from the same friends now is expressions of envy that they wished they’d done it too.

Over the last few years believing that the boom had finished, I have bought property, but only where I could see a clear development angle. To me the obvious investment opportunities had gone.

Investment opportunities
Previously, I had toyed seriously with broadening my geographic spread of investments to capitalize on the ripple effect in the UK of rising house prices originating in London in the mid 1990’s. But to be frank, I couldn’t be ‘arsed’.

More accurately- it was the prospect of having the responsibility for property miles away and without a ready supply of tradesmen that I could rely on to do the work. At the time it was just a problem too far and one that I wasn’t prepared to contemplate. The other property bandwagon I failed to climb aboard, much to my financial detriment was the on going international property investment circus. Having travelled extensively around Eastern Europe around the time of the new millennium, it was obvious to me that there were vast opportunities for investment, particularly in the Baltic States. Again the complications in buying in a strange culture, the time involved in researching and carrying out the purchase and the managerial challenges of supervising a property at that kind of distance was further than I was prepared to go.

‘Property burn out’
Looking back I also realise that the reasons that I didn’t go that extra mile and build on my modest financial successes were actually two fold: One I didn’t need to. I had made a modest ‘bundle’ and quite frankly that was more than enough to keep me going for the time been. The other reason and probably more important was; I’d reached ‘property burn out’. I’m not sure whether strictly speaking it is a recognisable medical condition; nevertheless I was suffering from it. A decade of living on my wits; dreaming, worrying, conspiring to create my property portfolio had taken its tole. It was no longer fun and I needed to move on.

‘Investment gravity’
These autobiographical ramblings bring me back to my epiphany. The reason for my perceptions on house prices was partly based on logic and partly on my experience in building and managing my portfolio of equities. Firstly, having been an investor in shares for slightly longer than property; my experience had taught me that what goes up eventually comes down. More specifically, there is a tendency that the quicker things go up, the quicker they fall. Therefore, having watched house prices go through the roof, the obvious conclusion was that at some point reality would bite and prices would succumb to ‘investment gravity’. My other reason was; I had very little faith in the current Governments ability to manage the country and in particular the economy. My expectation was that as house prices are only a reflection of the health of the wider economy and it would only be a matter of time before disaster here would filter into a house price correction.

The result of all this negative sentiment is that I have been very much an investment bystander. I have watched with bemused incredulity as prices continue their unstoppable upward journey. I now realise why they have continued to rise….continued tomorrow in PART 2

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