As fever raged, I saw sense – that ‘cash­ing in’ could cost me dear

The Daily Telegraph - Property - - Cover Story - Ed­mund Con­way

Ihave a guilty se­cret to share. For much of the past year or so, I have strug­gled to drum up real pas­sion about house prices. Don’t get me wrong: I have a great in­ter­est in the sub­ject. But for the most part it had, un­til re­cently, been some­what aca­demic, as I re­garded the mar­ket from an eco­nomic per­spec­tive rather than an emo­tional one. It wasn’t easy to em­pathise with those who have ob­ses­sions about the mar­ket — whether the home­owner rid­ing the crest of the hous­ing boom or the ten­ant fu­ri­ous about miss­ing out.

When I bought my first place — a lovely flat I com­pleted on eight months ago — I thought things might change. Each night I ar­rived back home half-ex­pect­ing a sud­den epiphanic mo­ment, when it would fi­nally dawn me how im­por­tant house prices are.

Alas, it was not to be, and de­spite the odd dream about in­ter­est rates (don’t ask), I still viewed the mar­ket with cold in­dif­fer­ence.

The fact was, I bought my flat more for love than money. I wanted to own my own place, with the free­dom to fur­nish and dec­o­rate it my­self. And though the price was high, I paid it try­ing not to ex­pect that it would shoot up fur­ther in the fol­low­ing years. I thought then, and still do, that the hous­ing boom was very near its end.

A few weeks ago, how­ever, ev­ery­thing changed. An­other prop­erty down the road, al­most iden­ti­cal to mine, was on the mar­ket for 25 per cent more. My cu­rios­ity whet­ted, I phoned the agent — and dis­cov­ered that, barely a week af­ter be­ing ad­ver­tised, it had been sold for a sum “com­fort­ably” above the of­fer price.

I could barely con­tain my­self. My mantra that “house prices don’t mat­ter” in­stantly melted away.

All my good in­ten­tions went to pot. Should I sell and re­alise the ex­tra money my home had gen­er­ated over the past few months? Should I re­mort­gage and free up all those thou­sands of pounds I had earned? For a while it con­sumed my ev­ery thought.

Thank­fully, good sense pre­vailed. Why bother sell­ing, given that it would cost just as much to find a sim­i­lar place in the same area? And why re­mort­gage un­less I was con­vinced that house prices would keep ris­ing — which I am not. To do so would sim­ply make me even more vul­ner­a­ble if rates rose higher than they are to­day.

Many of the po­ten­tial gains for home­own­ers from “cash­ing in” are chimeric. Un­less you have in­vested in prop­erty or plan ei­ther to down­size or move out and start rent­ing, the gains can­not truly be classed as “profit”; af­ter all, you have to buy a new house to re­place the one you’re sell­ing. Re­mort­gag­ing does not make one more wealthy, it makes one more in­debted.

True, our houses may rep­re­sent our big­gest as­sets, but ris­ing prices make us richer only inas­much as we ex­pect them never to fall.

Like most of you, I knew this per­fectly well. But now, hav­ing had my mo­ment of weak­ness, I un­der­stand that when pas­sions take hold, some­times it’s easy to ig­nore the sen­si­ble op­tion.

ed­mund.con­[email protected]­graph.co.uk. Ed­mund Con­way is Eco­nomics Ed­i­tor

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