The History of Property as an Asset Class

Ownership of property has been an effective asset class for hundreds of years, not only in the Wirral but throughout the world. Recent research released by the University of Reading has provided a shed a new light on the medieval property market in England between 1300 and 1500. From the growth of commuter belts near key locations to the risk of price bubbles, many of the findings have an instructively contemporary ring.

The eye-opening research takes us back to the beginning of property as an asset class in this country. The establishment of common law by King Henry II (My 28th Great-Grandfather) in the 12th century had laid down the principle that legal title to land would be protected by the royal courts.

By the start of the 1300s, half of all land was freehold. That meant it could be passed on not just by inheritance or at the discretion of a feudal lord, but in the marketplace, though private transactions overseen by lawyers.

The freedom to buy and sell property produced visible patterns that we still recognise today. Even then as it does today, London’s importance drove land purchases across the Home Counties. And similar early commuter belts seem to have formed around cities such as York, Bristol and The Wirral.

Released from the grip of the great lords, those buying and selling property included clerics, merchants and craftsmen, as well as successful professionals, soldiers, lawyers and royal officials. Property offered economic security and social status. But it was also just like today, a potential source of financial income and profit.

With that possibility came the shadow side of investing, the risk of losses. Researchers found evidence of bubbles in agricultural land prices during the period they studied, with prices inflating sporadically before eventually collapsing again. It could be possible that some who were wealthy from trade may have driven up prices as they bought property to join the landed gentry.

Losses could also come through the still-familiar route of political risk. The heavy tax burden imposed by King Richard II and his predatory moves to undermine the security of property rights appear, unsurprisingly to have depressed investment.

Recovery came in 1399 with the accession of King Henry IV, who was more willing to defend the rights of property owners.

Today property still offers us the potential for lucrative returns, but also new forms of the same old risks. In the past half century, the average house in Britain has risen in value by around 60 times. But that huge increase has not been smooth. Property buyers have had to tolerate periodic price falls that could take years to recover, an important lesson from history shows that with property, whatever the century, it pays to keep your wits about you.

But today, residential property is not the only option, over the year’s investors have found new strategies to monetise property and new routes to diversify their financial portfolio.

“Property cannot be lost or stolen, nor can it be carried away. Purchased with common sense, and managed with care, it is about the safest investment in the world”

Franklin D. Roosevelt