The Sunday Times Money section contains one of my favourite reads of the week – Fame and Fortune, an interview with a celebrity about what they do with their money. One question always asked is, “Property or pension?” For the last five years, pretty much every single one has answered “property”. They’ve explained how you can’t go wrong with bricks and mortar; revealed what they paid for their Islington townhouses and country cottages and how much they believe they are worth now; praised the free-money qualities of buy-to-let; and positively gloated over the imaginary property profits lining their designer pockets.
No more. This week’s interviewee, impressionist Jan Ravens (homes in Barnes and Cornwall), didn’t seem so sure. She went so far as to accept that the property market looks “grim”, and even said that while property was probably best for “the long term”, she feels that the “best possible thing to do is diversify”.
Growing numbers of celebs must wish they’d done just that. Think of poor Grant Bovey, Anthea Turner’s husband, and his Imagine Homes. Only a few months ago he was threatening to sue anyone who suggested his empire was in trouble – even though regular M4 users will have noticed that the large Imagine Homes office space you pass on the way into London has been saying “Opening Soon” for years. Imagine, he told the Daily Mail, had “huge profits that have yet to materialise”. Today the business is in administration and the paper reports it’s also being sued by a cleaner for nearly £8,000 of unpaid wages.
And consider the plight of our Premier League footballers, who, says The Daily Telegraph, face “a spending squeeze” due to the “critical condition” of many of their investments. What are those investments? Mainly houses, it seems. Many have huge investments in property here and abroad (celebs love Dubai for reasons it is hard for non-celebs to grasp), on which they face “vast negative equity”. The reason most celebs give for buying property is that they “understand” it in a way they can’t grasp the wider financial markets. The problem, of course, is that they can’t understand the property market either. Property prices, as we have said again and again, are not about the supply of, or demand for, houses – they’re about the supply and demand of credit. That boils down to all sorts of things – from interest-rate policy and money supply to banking regulation and confidence. And all that, as the world’s chastened economists should all agree, is pretty tricky to understand.
I’m now going to take a break from trying to make sense of everything for a few months. I’m going on maternity leave, leaving you in the safe hands of MoneyWeek’s new editor, John Stepek, who should be able to help you safeguard your capital and find some safeish places to invest into the new year. Happy Christmas.