Moving out of Ululand Avenue into the Ritz?
The terms of trade are attractive
CHRISTOPHER FILDES
escribed in print as a raffish Harrovian millionaire, a friend of mine was affronted: 'Who's a millionaire these days? Anybody with a house in Fulham who hasn't got a second mortgage.' For millionaires in this class, now is the time to think of selling up and moving into the Ritz. It would be an even smarter and more convenient location than Ululand Avenue and the terms of trade are most attractive. You would expect to negotiate a discount for a long stay, and my inquiries suggest that for between £65,000 and £70,000 you could book yourself into the Ritz for a year. Just think of the costs it would save you. No rates, no bills for water or gas or electricity, nothing to spend on carpets and curtains and cleaners. If the builders allege that the roof needs replacing and that they will have to put scaffolding up, that is the hotel's worry, not yours. Put all these costs in, for argument's sake, at /7,500 a year, and it brings down the equivalent price of your room at the Ritz to £60,000, which is what your mortgage costs. After last week's cuts it should be possible to get an interest-only mortgage at a rate of 6pc: £60,000 for the Fulham millionaire to find out of his taxed income. He can smugly claim that in this last year he has lived there free of charge. House prices rose, on average, by 10pc, which will have been enough to cover his mortgage and leave him ahead of the game. Even that gain, though, is not the same as cash in hand. He cannot sell his conservatory or his second bathroom if he needs to raise the wind. Once the rate of house price inflation falls below the rate of interest, his free ride is over — and if house prices fall, he would be far better off in the Ritz.
Refugees remember
PEOPLE in Ululand Avenue think that house prices are not supposed to come down. Refugees in the Ritz think they do — late in the cycle (as now) and after the stock market has shown the way. In the 1970s their fall was masked by inflation, but at the end of the 1980s nothing masked it. The stock market had cracked, the economy was faltering, but in that last hectic summer pairs of high church curates were scrambling to buy attics on a joint mortgage, so as to collect two sets of tax relief before the concession ran out — and then, suddenly, it was all over. For the next few years, the Ritz was the place to be. Those who had sold and moved in could wait for the chance to buy their houses back more cheaply. In that sense they would have lived at the Ritz free of charge. We should all be so lucky. This is a possibility I have explored before now, but the difficulty has always been to secure accommodation for my cat, who might have some trouble in finding a room or a mortgage.
Unsustainable
WHAT a difference a month makes. In July the Bank of England's monetary policy committee was all set to aestivate until the autumn. Almost unanimously, it thought that the right thing to do with interest rates was to leave them alone and wait and see. Last week it voted to cut them — so what has it seen? Slower growth, of course, around the world and notably in Europe, where the currency's weakness has now forced prices up and curbed consumer spending — but British consumers have carried on spending as if there were no tomorrow. There is, though. 'Unsustainable', Mervyn King, the Bank's Deputy Governor, called the spending boom this week, and the longer it carried on, the harder the fall would be. With manufacturing in recession and the service industries beginning to slow down, to delay any policy response (so the committee thought) risked deepening the downturn. Instead, we have cheaper mortgages, but the smart money is still on the Ritz.
Sobering thoughts
THE offices of our esteemed contemporary Personnel Today must be a sobering place to have lunch. It has conducted a survey of 300 companies and finds that three-quarters of them think that lunchtime drinking should be banned. They also want random tests to detect those who take their lunches up their noses. This survey was conducted in association with two charities called Alcohol Concern and DrugScope, and might, I suppose, have come out differently if it had been commissioned for the Licensed Victuallers Gazette, but it is good news for personnel officers. Few companies think that they know how to talk about problems of this kind, and fewer still do random testing. What they must need is more personnel officers, suitably trained and equipped. Then the ones they have now can promote themselves to be global human resource co-ordinators, and work out what the charity calls effective, wellrounded alcohol policies. It all makes work. Just now the cold winds are starting to blow through dealing rooms and executive suites and poor old middle management, but when did you last see a human resources director get fired? They are needed to devise and implement the new downsizing policy, lining up P.45s as they leaf through the pages of Personnel Today.
Losers weepers
ITS got be somebody's fault. We couldn't have lost all that money in dot,coms if we hadn't bought them, so we'll sue the banks that sold them. Americans respond to misfortune by reaching for their lawyers, and six investment banks on Wall Street have been joined in a lawsuit, accusing them of pumping out technology investments which they knew, or should have known, were bags of nails. I seem to recall that they were blamed at the time for keeping all these good things for their friends and not letting the mug punters get a look-in. The friends and the punters deserve to be properly grateful.
Lawyers keepers
THE man who saw this happen last time round was 'Adam Smith' — not the sage, but the author of The Money Game and Supermoney. Here he is on the Penn Central Railroad disaster: 'The value of the stock is negligible. The value of the bonds is questionable. It will take twenty years to straighten out. What you should buy is Shearman and Sterling, the lawyers, who will get all the money for the next twenty years.' Alas, lawyers hang on to their shares and never bring them to market. Perhaps we should sue.
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