'House prices may be booming, rocketing, but few of us are in a position to cash in'

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The Independent Online

I HAVE always thought houses were great investments apart from one small problem - you have to live in them. The simple desire to have a roof over your head takes the home out of the realm of the investment and transforms it into, well, a necessity.

I HAVE always thought houses were great investments apart from one small problem - you have to live in them. The simple desire to have a roof over your head takes the home out of the realm of the investment and transforms it into, well, a necessity.

There may be those who by choice or good fortune have secured a veritable avenue of houses. No doubt they are basking in the warm glow provided by the steady stream, nay torrent, of surveys which show house prices are booming, soaring, rocketing to levels not seen since the last survey. The rest of us can merely sleep easy in our beds knowing we still have a roof over our heads and that the roof maybe worth a few bob more than a month ago.

It is always reassuring to know that an asset is increasing in value but the simple fact is that any capital appreciation is largely irrelevant since few of us will be in a position to cash in. If you are moving house, and are trading up, the rise in prices will tend to work against you. Imagine you have a home which a year ago was worth £100,000 and you intend to move to a house which at the same point in time was worth £150,000. If both properties have appreciated at the same rate, say 10 per cent, your home will be worth an extra £10,000 but the place you are buying will be worth an extra £15,000. Only if you are trading down will there be any tangible benefit.

True, you could go in for some kind of refinancing or remortgaging plan in order to liberate some capital but there are inherent risks in this. The sad fact is that the wild fluctuations in property prices which have typified the housing market over the past two decades have undermined the integrity of the house as a residence alone. In too many people's minds the home has become an investment.

My first tentative step on to the property ladder, many moons ago, was not taken to secure wealth but rather independence and freedom from the tyranny of sharing a house with my chums. My flat mates were friends from university days. While they were wonderful people to play darts with at the Green Man, I had grown weary of coming home late, my mouth watering at the prospect of launching into my meat pie, only to discover it had already been sequestered. My job as an accountant was also taking me away from home for long periods and I was getting fed up of paying the rent for a room which I was not using. Buying my own flat was a natural evolution.

Since then, I have steadily inched my way up the ladder, not in any quest for the holy grail of capital appreciation but as part of a natural progression. In the past 20 years I have moved house 10 times. I have had flats, maisonettes, detached houses, semi-detached houses and town houses. I have rented I have bought. But each move was in response to my erratic circumstances and not prompted by any wish to exploit fluctuations in the property market.

One thing has struck me, however. The moves I made in the last decade have been more nerve-racking. The boom which drove house prices to dizzy heights in 1988, only to give way to a wicked slump, made an already stressful process all the more difficult by adding the fear of financial risk and the spectre of negative equity. The frenzy of property deals, fired by speculation and tax avoidance, drove prices to new peaks and any sense of financial security embodied in home ownership was cruelly ripped away.

After such a traumatic experience I had rather hoped that a more considered approach might have been taken in this latest housing boom. Not a bit of it. The surveys trumpet their findings which are duly reported by the media and we are suddenly locked, once again, into a boom-bust cycle which can only end in tears.

What I find most offensive is some people's desire to jump on the house boom bandwagon. I was appalled this week to receive a missive from something called Your Mortgage whatever that is. The press release boasted of unique house price projections suggesting that in some areas house prices will rise by 40 per cent over the next in five years. It is patent nonsense and highly damaging. Let me assure you. If these people really knew what would be happening to property prices in five years' time they would be playing the market themselves.

The Bank of England has already indicated that it is watching the housing market with a degree of concern. If for one minute the boom threatens to encourage rising inflation then interest rates will be hiked up to quell demand, as indeed was the case last month As base rates rise so do mortgage bills. Higher interest bills mean lower house prices. The notion then that this boom can continue unabated is fanciful.

We may be locked into a boom-bust mentality but it is possible to break free. We hold the key. Treat house-price surveys as a little bit of harmless entertainment but do not let them influence your plans. Make your house your home not an investment. A home can be nurtured, shaped and crafted, it can be warm and welcoming. An investment can go down as well as up. And down it will go, with a crash not a bump. Your home, however, will remain your castle - irrespective of what the surveys say.

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