Prison of my own making

A lazy Springtime Saturday morning.

Early morning sunshine crept over the rooftops. Illuminating the cat silently stalking sparrows amongst the random bunches of flowers that had mysteriously bloomed on the back lawn.

Inexplicably, she doesn’t kill the little birds when she catches one.

Instead, she gently carries them through the cat door, then releases them to fly freely around the inside of a house sized cage.

Convincing the birds to fly back outside again is harder than you may think. Seldom an ideal way to cap off a typically frustrating day at a client site, especially on a cold rainy evening!

Dualing screens at the breakfast table.

Younger son watching a Teen Titans Go cartoon. Fart jokes. Catchy songs with witty lyrics. Doing a surprisingly credible job of explaining the economics of becoming a private landlord.

Elder son watching some annoying YouTuber who publishes a seemingly endless stream of videos showing him playing computer games with his imaginary friends on the internet. Fart jokes. Begging for likes and subscribers. The influencer fallacy in action.

My screen displayed the week’s news from back home.

Bushfires forgotten.

Fear and attention seamlessly transitioning to the next crisis. This time a mystery virus from overseas.

A video of three fat women fighting over the last pack of toilet paper in a supermarket dominates the front pages. Barely a mention that the local women’s cricket team had made it to the World Cup final.

Local interest rates had been cut.

The excuse being one-off events like virus fears and bush fires. The reality, a stalled economy heading for its first recession in nearly 30 years. A remarkable run, especially given the many clown car governments and Game of Thrones leadership changes they’ve endured throughout.

Not to be outdone, the Americans followed suit by cutting their interest rates.

Their move defied logic. An apparent attempt to shore up the re-election prospects of a President who uses the Dow Jones Industrial Average as a proxy for his administration’s economic performance.

The United Kingdom’s rates are negligible.

Europe’s non-existent.

Japan’s negative.

Groundhog day

As predictable as the arrival of the daffodils is the Springtime resumption of hostilities about the merits of homeownership in a high cost of living neighbourhood versus living a semi-retired lifestyle while renting.

Two intractable forces of nature.

Inexorably coming together like speeding freight trains playing a game of chicken.

On the one hand, a fear of missing out and a desire to keep up with those troublesome Joneses.

On the other, reasoning that can be distilled down to: “just because we can, doesn’t mean we should”.

Sure enough, my lady wife appeared mid-morning. Battling a cold. Nursing a hangover after a girls night out that started with tequila on an empty stomach and ended with shopping spree in Selfridges.

A comment here.

One of her single friends is planning to downsize and move into the centre of town. Walking distance from work. Removing the need for a car.

The kids glanced uneasily at each other.

An observation there.

“Several new property listings have hit the market in our neighbourhood this week“.

Younger son rolled his eyes. The atmosphere in the family room noticeably chilled.

A warning shot across the bow.

“Interest rates are so low that borrowing is essentially free”.

This is true.

Elder son mouths “good luck” as he scooped up the iPads and bolted for the exit.

A ranging shot.

“Mortgage payments would be less than we currently pay in rent“.

This is partially true. The interest component of a mortgage payment would be less than our current rent.

Younger son scarpers upstairs after his brother.

Target acquired.

Another of her friends has just apparently completed their final renovation project. A guest cottage/teenager retreat.  Credit where it is due, they have a beautiful home.

The cat poked her head through the cat flap, carrying yet another sparrow. Glanced at my lady wife. Froze. Glared at me. Dropped the bird inside, sprinted across the yard, and leapt over the back fence.

Engage.

“Why is it that all my friends have nice things, decorate their homes however they like, but I can’t?”

I mentally donned a helmet, hunkered down inside my foxhole, and kept my mouth firmly closed.

Incoming!

The disorientated sparrow lurched into the air.

The conversation paused as we watched it fly across the family room like a punch drunk boxer.

It emptied its bowels as it passed over my computer, before crash landing on top of the fridge.

Sigh. Some days I’m the seagull, some days I’m the statue.

Today it appears I am to be shat upon from a great height. Both literally and metaphorically.

Springtime has arrived once more.

Mission impossible

When it comes to owner-occupied real estate my lady wife knows exactly what she wants.

Essentially it is the house we currently rent.

Same size.

Same layout.

Same location.

There is just one problem: it isn’t for sale.

Selling up would see my landlord incur a capital gains tax bill in the region of half a million pounds. A problem she plans to leave to the beneficiaries of her will, along with their inheritance.

Nor are any of the handful of comparable houses in the neighbourhood for sale.

A few months ago we had a false start with one comparable property down the street.

Delusionally overpriced.

A seller who pined for the days before Brexit.

Before financing costs ceased being tax-deductible.

Before stamp duty surcharges for owners of multiple properties.

Before the once “outstanding” rated local school toppled from its pedestal.

A machiavellian buyer played them at their own game. Outbidding everyone else to clear the board. Dragging out the conveyancing process while the seller mentally spent the proceeds. Then gazundering them, repeatedly, once the seller had financially committed themselves elsewhere.

According to the land registry, the eventual sale price was £50,000 less than houses on the street were selling for five years ago.

Prison of my own making

As appears to have established itself as an annual tradition, Springtime finds me challenging some of my premises and preconceived ideas.

Validating whether or not my preferences make sense.

Can my beliefs withstand rigorous scrutiny?

Am I fighting the last war? Dated and irrelevant.

Or worse, a religious war? Ill-informed and misguided.

I am very conscious that many of us are trapped in prisons of our own making. Myself included.

Biases, past choices, and preferences blind us to opportunities and blinker us to potential options.

Setting aside my lady wife’s very prescriptive wants, I decided to test my own thoughts on property.

What assumptions and conditions have I constructed my prison from? Do they still hold true?

Marriage

Marriage is an interesting nexus of life choices, legal protections, and unanticipated consequences.

An institution in decline.

Fewer people are getting married.

When they do, it is at an older age.

Once married, nearly half of them fail.

For those folks, marriage proves to be one of the most costly financial decisions a person can make.

As I’ve gotten older I’ve observed that the things that people want, and those make them happy, change. Some relationships evolve along with these changing hopes and desires. Many do not.

Add a bit of “life happens” randomness and things can become interesting.

Some couples grow apart, heading in different directions. Other times one partner outgrows the other.

Some remain unhappily ever after. Afraid of being alone. Financially constrained. For the kids.

A fortunate few grow closer the longer they are together. These are a rare breed if my peer group is anything to go by!

My first working assumption is that I wish to stay married and remain cohabitating with my family.

This assumption imposes some constraints.

A whole world of potential property options shrinks considerably, limited to London.

Any owner-occupied home purchase would need to be a house, not an apartment.

That house would require at least 4 bedrooms, 2 bathrooms, and some outside space.

While these constraints are onerous, they are also non-negotiable. The price of assumption #1.

They have been thoroughly probed and tested. Proving resolute and immovable. I have the scars to prove it.

Commute

The second working assumption is what constitutes a reasonable commute.

I am unwilling to regularly endure a daily door-to-door commute of longer than 45 minutes, each way.

Life is too short.

Commuting is lost time. Non-billable. Seldom doing the things I enjoy. Time away from my kids.

My clients are generally based in the City. Therefore my commuting circle is centred on Bank station.

Schools

The third working assumption is that my children will complete their secondary school education at the high school my elder son currently attends.

I have some issues with the school’s priorities, but there is no arguing with their track record of students receiving offers to excellent universities. By way of comparison, many of the other state high schools in my part of the world do not provide a viable pathway to any university at all.

Another key factor here is that my son actually enjoys going to school.

He has made friends with a nice bunch of kids who seem to compete with one another to be the best academically. Getting into the school was an expensive sunk cost, so it is great to see him making the most of the opportunity.

Commuting is no more fun for him than me, so I drew another commuting circle on the map centred on the high school.

The result was a Venn diagram that looked like it had been drawn by a sugared-up toddler suffering from early-onset Parkinson’s disease. The overlapping segments defined the boundaries of the universe of candidate properties that meet all three working assumptions.

Money

According to the past sale statistics, the average sale price for an appropriately sized house within that universe was… a lot.

Large enough that anything but the top prize in this week’s Lotto draw simply wouldn’t get the job done.

A sum that if invested, the natural yield would comfortably out-earn the nation’s median household disposable income.

2.5x the price of a beachfront house where I would live, were I to return to Australia.

2x the price of a comparable house with ocean views in a nice part of Cornwall.

1.5x the price of a well-located apartment by the sea in the South of France.

An amount slightly smaller than the Gross Domestic Product of the Federated States of Micronesia.

Prevarication aside, that average sale price achieved in the last 12 months was also larger than the properties in my neighbourhood have been selling for. Which doesn’t make them cheap by any measure, but it could certainly be worse.

If the Coronavirus mortality rate projections amongst the elderly prove to be even slightly accurate, then over the next few months there will be quite a few properties in my neighbourhood hitting the market. Their current occupants will unfortunately no longer need them.

If the mooted tax penalties for non-resident buyers prove to be more than an exploratory test balloon, then the competition for those properties will be greatly reduced.

If the approaching economic storms that are visible on the horizon end up being as turbulent as they appear, then the herd of potential buyers may thin out considerably.

That said, if wishing made things so then my lady wife would already own a beautiful house the envy of her friends, and I would be living by the ocean somewhere sunny and warm.

Balance

Which brings me to my fourth working assumption, that I wish to remain semi-retired.

Trading a sizeable sum of investments for a paid-off house appeals to my lady wife. Depending on the purchase price, it would potentially also be a cash flow positive move.

Indeed, the historically low interest rates potentially provide the ability to get the best of both worlds. Leverage is always a risk, but a calculated one.

Financially at least, this decision should be a no brainer.

And yet I hesitate.

Freedom

Eventually, my lady wife grew frustrated and stormed back to her eyrie in the loft.

I opened wide the skylights in the family room, hoping the fearful sparrow would return outdoors.

Experience has taught me to give plenty of time and space, it is best not to rush these things. Rushing doesn’t achieve the desired outcome any faster, yet inevitably stresses out all the participants.

While I waited, I pondered why I was gun shy about buying an owner-occupied house.

It wasn’t a religious objection. On several occasions I have purchased a home to live in. We just haven’t tended to live in them for very long.

It wasn’t the money, silly though the numbers most certainly are. My existing property portfolio is worth more in aggregate than the asking price for a typical house that ticks my assumption boxes.

In part, I am wary of the endless renovation and redecorating projects that would undoubtedly follow.

In part, I fear being trapped in a prison of my own making, turning into an old man living in London.

My inner saboteur believes that buying a home intended to house my children through to the end of their childhoods would be conceding that my dream of living by the ocean was just that. A dream.

It may be right.

The sparrow finally emerged from above the fridge. After glancing furtively around for the cat, it took flight and escaped through the skylight to freedom outside.

That gave me pause. Why the recurring theme of incarceration?

Connotations of deprivation of liberty.

Absence of choice.

Denial of freedom.

Lack of control.

All things that are done to a person. Yet always as a consequence of their own actions and choices.

Food for thought. We are each only as trapped as we choose to be.

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References

• Bank of Korea (2020), ‘Base Rate‘
• O’Brien, G. (2019), ’27 years and counting since Australia’s last recession’, Parliament of Australia
• Office of National Statistics (2020), ‘Average household income, UK: financial year ending 2019‘
• Office of National Statistics (2019), ‘Divorces in England and Wales: 2018‘
• Office of National Statistics (2019), ‘Marriages in England and Wales: 2016‘
• Reserve Bank of India (2020), ‘Bank Rate‘
• Swiss National Bank (2020), ‘Current interest rates and exchange rates‘
• The Economist (2017), ‘How Australia broke the record for economic growth‘
• Travel Time Platform (2020), ‘Travel Time Platform‘
• Whitbourn, M., Fitzsimmons, C. and Drevikovsky, J. (2020), ‘”It’s not Mad Max”: Fight in Sydney Woolworths as tensions flare over toilet paper’, Sydney Morning Herald
• Zoopla (2020), ‘Property value data/graphs‘

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