CITY AND SUBURBAN
Wait for it, but the time will come to move out of houses and into the Ritz
CHRISTOPHER FILDES
Iam getting ready to sell my house and move into the Ritz. No hurry, of course, but these things need planning and timing. If I get it right, I shall be rich — well, richer, anyhow. It would have worked last time round. For most of the 1980s the right thing to do was to be long of property and short of money. The rate of increase in house prices was higher than the rate of interest on mort- gages, so, roughly speaking, the bigger your house was and the more money you bor- rowed against it, the richer you got. It paid us to run our net holdings of cash down to zero and even below. Then, suddenly, the balance reversed. Interest rates soared, house prices tumbled, and it paid to be short of property and long of money, with your cash in the bank and yourself in a hotel room or a tent, preferably rented. Few of us timed that one right. Most of us were caught on the wrong foot and stayed there, watch- ing impotently as our wealth diminished. In the end we were washed off the rocks by a flood tide coming in from the stock market. The stocks and shares we own, and those that the life assurance offices and pension funds own for us, came to be worth more than our stakes in our houses. Now houses are catching up. Our personal wealth (which Michael Saunders of Salomon Smith Barney measures) has risen by 7 per cent in a year, after allowing for inflation, and the second quarter of this year saw the steepest jump since the 1980s, Once again house prices are leaving interest rates behind. If history repeats itself the stock market will crack before the house market does, so I have time in hand (and a signal to watch for) before I switch into the Ritz. On second thoughts, I might pay off my mortgage and stay put. Houses are for living in.
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