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