PERSONAL ACCOUNT

Property’s history as an asset class shows its risks as well as its rewards

Sometimes the past doesn’t seem so far away. A trove of research released this week by the University of Reading sheds new light on the medieval property market in England between 1300 and 1500. From the growth of commuter belts to the risk of price bubbles, many of the findings have an instructively contemporary ring.

The eye-opening work of Professor Chris Brooks, Professor Adrian Bell and Dr Helen Killick takes us back to the beginning of property as an asset class in this country. The establishment of common law by Henry II in the 12th century had laid down the principle that legal title to land would be protected by the royal courts. By the start of the 1300s, half of all land was freehold. That meant it could be passed on not just by inheritance or at the discretion of a feudal lord, but in the marketplace, though private transactions overseen by lawyers.

Rapidly, the freedom to buy and sell property produced patterns that we still recognise today. Even then, London’s importance drove land purchases across the Home Counties. And similar early commuter belts seem to have formed around cities such as York, Bristol and Norwich.

Released from the grip of the great lords, those buying and selling property included clerics, merchants and craftsmen, as well as successful professionals: soldiers, lawyers and royal officials. Property offered economic security and social status. But it was also, like today, a potential source of financial profit.

And with that possibility came the shadow side: the risk of losses. The researchers found evidence of bubbles in agricultural land prices during the period they studied, with prices inflating wildly before eventually collapsing again. Some who were wealthy from trade may have driven up prices as they bought property to join the landed gentry.

Losses could also come through the still-familiar route of political risk. The heavy tax burden imposed by Richard II and his predatory moves to undermine the security of property rights appear – unsurprisingly – to have depressed investment. Recovery came in 1399 with the accession of Henry IV, who was more willing to defend the rights of property owners.

Property still offers us the potential for lucrative returns – but also new forms of the same old risks. In the past half century, the average home in Britain has gone up in value by around 60 times. But that huge increase has not been smooth. Property investors have had to tolerate periodic price falls that have taken years to recover.

Right now, price growth is slowing in a subdued housing market. This week, Office for National Statistics data showed the London property market’s first annual fall since 2009. This comes alongside wider fears of an affordability crisis, and political crackdowns on certain types of owner, notably buy-to-let investors. With property, whatever the century, it pays to keep your wits about you.

But today, property is not the only option. In the 1300s, housing provided a new way to diversify financial portfolios. The upwardly mobile citizens snapping up parcels of freehold land would not have passed up the chance to grow their wealth further by investing in today’s universe of funds and shares – especially in combination with Isa or pension tax-efficient wrappers. Don’t let the timeless seduction of property blind you to wider opportunities in today’s investment marketplace.

Marc Sidwell

Head of Personal Finance @marcsidwell

Lauren Davidson

Personal Finance Editor @laurendavidson

Contact us

money@telegraph.co.uk 020 7931 2000

Jeremy Irons as King Henry IV