Property: Why billions can't be wrong

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The Independent Online
I AM A FERVENT believer in the euro. Not on any economic or political grounds but simply on the basis that it will make house prices cheaper.

Wherever I travel I find that one British pound buys many more units of the country I am visiting. Last week I was in Italy where one pound buys many thousands of lire. Soon I hope to return to Romania where it feels that one pound secures several million lei. I am assuming that one pound will therefore equate to multiple euros.

Trousering many thousands of a currency gives a warm feeling of wealth. It may well indeed take the demolition of the Brazilian rainforest to manufacture the notes required to purchase a large black coffee but that is another issue. Put simply, if your house was valued in lei rather than in pounds then the number would be around 14,000 times higher. A house worth pounds 100,000 is worth around 1.4 billion lei. Whatever, it is a big number and one which will impress down at the Snug Bar of Il Founti di Tutta Knowledgii.

The point here is that given our fixation with high property prices, adoption of a new currency will create many more property millionaires and at a lower level in real terms. This has to be good for people like myself who are priced out of the market by the configuration of the pound sterling relative to international currency markets.

I have noticed that estate agents are keen on a round number approach to house pricing. When they ask me what price bracket I am looking at they tend to talk in units of pounds 50,000. I once replied to this inane question by giving a precise number of pounds 136,789. "So, pounds 150,000 then," came the riposte. Despite my argument that pounds 136,789 was a lot less than pounds 150,000, the best I could extract from him was an assertion that my price bracket was between pounds 100,000 and pounds 150,000.

The consequence of this mindless approach to valuation is to drive prices naturally higher. Estate agents being what they are, however, will struggle to cope with the translation implications of the switch to the euro. With a bit of luck this will bring down house prices. Say the conversion rate is 12.769 euros to the pound, then a house valued at pounds 100,000 will become worth 1,276,900 euros. That is a bit of a messy number. Much better to call it a straight 1 million euros. By my reckoning that equates to a price cut of about 20 per cent. If this trend could be repeated across the market, it would represent a controlled and invisible property slump. This would be good for me and for the Bank of England, which frets about rising asset prices.

But there appears to be mounting opposition to the introduction of the euro, no doubt orchestrated by newspaper folk concerned about erosion of their house prices. The invisible slump will represent a much-needed correction to over-inflated prices without the need to ramp up interest rates to achieve the desired effect. This is good news for home owners. The euro conversion inspired slump will then provide a more powerful foundation on which a renewed property boom can be built.

The euro will allow me to do away with the accumulation of a forest full of local currency which I keep in my drawer only to pull out the wrong one when I embark on my travels.

Roll on the day when our brave boys with the cans of lager and tattoos on their foreheads will be chant: "Here euro, here euro, here euro." Monetary and political union and cheaper property prices - a dream ticket.