In reality the only ‘ownership’ in the UK is held by:
Church
Crown
Government
As has been said with freehold you ‘own’ the land but in reality those are usually for 999 years or so, or whatever is contractually agreed. The upshot? You don’t actually ‘own’ it. This is different in Scotland for example where ownership is in the truest sense of the word. For example in Scotland if you own land you can stop the right to roam across that land legally, in the UK you can’t. So in the UK if there is a public footpath you can’t legally bar someone from using that access across your property.
This is what I’m doing, renting to buy. Doing the old house up to the correct standard and renting it. The rent will pay for a much larger property in a countryside setting.
If you’re talking from the perspective of someone living in London, the major way to make money out of house price bubble is to get out of there.
If you don’t have to live in London itself, moving to another part of the country before the bubble pops will get you more house for your money. If you have housing equity or own outright, you might even be able to cash out if the price difference is large enough (Which it probably is. Average house price in London will buy you nearly 3 average houses in Scotland or Wales).
If you’re talking about betting directly on the change in house prices, then you could try spread betting on the house price index. London has such a large effect on the UK average that a localised fall in house prices would influence this figure. Do not actually do this. Spread Betting is highly leveraged, requires you to time the market and can cause catastrophic losses if the market moves against you.
Thirdly, you could bet on the underlying cause of the fall in values. The market is currently being propped up by wealthy overseas customers, so what do you think would cause them to stop buying up bits of London:
Soaring Pound? A (more) Xenophobic Government taking power? Pandemic causing the collapse of international travel?
All of these things can be wagered on.
That’s not exactly accurate. While it’s true that land ownership in England is significantly different to that in Scotland, It has been the case for a long time that the general public have greater access to the land in Scotland.
If the prices are high due to fundamental supply shortage, then I don’t know if the bubble would really “pop”. In San Francisco, prices never really went down when the national real-estate bubble popped. They just stayed flat for a few years. The popping happened in places that were a lot more speculative investment like Las Vegas, Florida, Reno, etc. Places were large new inventories were built up solely to feed the speculative market. I would be really careful about assuming large price drops in a tightly constrained market.
I hear the directors of Genetic Control
have been buying all the properties
that have recently been sold
(taking risks oh so bold!)
since all the people
will be shorter in height
they can fit twice as many
in the same building site!
You don’t. At least there’s no real practical way to.
Granted I’m not familiar with current laws in London and current market conditions for residential property nor current paper equities. BUT I do know about the current central banker, Mark Carney. His current actions of lowering/keeping low rates are going to keep residential property prices high for awhile. The key unknowns is when and how much. No one can say for certain when, but any serious economist will tell you keeping rates this low with high property prices is not a great idea.
ETFs, REITs, derivative actions like options, I would not suggest to use. Most corporations have moved on to more diversification after the GFC. They’re more likely to take a hit and survive. REITs that hold multiple types of property won’t get hit much. Their portfolio of property is a lot different than holding single residential real estates. Commercial and industrial renters are less likely to move and hold multiple year contracts on rent in comparison to renting out a house.
The old money that invests in London isn’t as easily spooked as the new money that “invests” in Las Vegas.
There is no need to target London specifically if one wants to take a contrarian position; simply limiting one’s exposure to financial risk in general is probably the wisest course of action for anyone who believes the economy is on shaky legs. Yet most people will take big risks like investing in Gold. If you want to short something, how about Gold and bitcoins.
See "Fleecing the Lamb for examples of “pump and dump” and manipulative shorting.
For a full description of how the US housing and sub-prime mortgage bubble was shorted see “The Big Short”. The upshot is that systemic fraud in the mortgage industry CDO packaging and valuation was recognized by a few traders and capitalized on to great profit.
The commentor who mentioned London as an example of a high-value market because of the investment of the rich is on the mark. The market will turn only if a great many of those people become much less wealthy and are forced to liquidate their London assets under pressure. Such a thing would most likely be associated with a wide-reaching, possibly global, financial meltdown. Shorting the London housing market would take a lot of balls and a much larger amount of money.
Trying to time the market is almost always a losing proposition, and derivitives are always riskier than they seem since they folks selling them price them so you’re the one bearing most of the hazard… so the answer to “How would I short London” is either “I wouldn’t try” or “with a huge pair of alligator clips and a high-tension cable”.
Welcome to the free market. Or, more accurately, welcome to free-market gambling, because except in very specific circumstances where they’re used to hedge one’s existing longer-term investments, shorts and other options and derivatives really are gambling rather than investing.
Make sure every inch of the way you know the worst outcome for you. Go to the casino only with the money you can afford to lose.
I’m wondering if there’s some kind of risk-o-phile element in @doctorow, like when he was considering flying a microlight over the Rockies in a winter storm to make a booking. Or something like that.
If you already own London property: Sell it now and buy property in one of the nicer commuter belt towns.
If you don’t already own London property: buy shares in an ETF of the FTSE500 (not perfect, and there’s a lag, but buying the stockmarket can be a reasonable proxy for shorting property - see http://goo.gl/ng55K4 )
Disclaimer: I sold a flat in E1 way too early, and have made a loss on all major investments to date until I bought some bitcoin 2 years ago.
If bitcoin is your idea of an investment, I’m not surprised.
I’m averaging over 10% return on my investments, and that’s despite the years lost to the market crash… and I’m doing nothing special; I’m buying mutual funds for diversification, and I’m holding them modulo a bit of rebalancing. If you’re content with market rate of return, it isn’t hard to get. If you insist on trying to do better than the average, you’re probably gambling rather than investing.
To some extent that is because of the machinations one can use to artificially cause a stock to drop in price. I wouldn’t consider shorting evil in and of itself, but it certainly does lend itself to unethical manipulation.
That just hasn’t been my experience. Most of my career has been in banking (Rabobank, CLS, CUA…) so I’ve had plenty of good advice, and I have generally made conservative picks. All modest gains I made were wiped out in the crash, and then a little bit more, meaning cash under the mattress would have done marginally better. So it goes.
