Monopoly of Property

Friday 23rd October 2015 07:25 EDT

I like Monopoly, and have done for decades, the problem is no one likes to play with me. They say I take it too seriously and am too aggressive; some have even accused me of taking advantage of other players. I think that’s a little unfair, I just like to get involved with the game and play to win.

Monopoly was made in the US in 1903, and has become a game which is almost timeless. Variations of the original have been made, but it still survives as one of the all time favourites. The game is named after the economic concept of monopoly—the domination of a market by a single entity. Players move around the board buying or trading properties, developing their properties with houses and hotels, and collecting rent from their opponents, with the goal being to drive them all into bankruptcy leaving one monopolist in control of the entire economy. It has become a part of popular world culture, having been locally licensed in more than 103 countries and printed in more than 37 languages.

Though it’s only a game, it is very revealing game for one it shows peoples’ characters and how they deal with money in real life. There are those who never wish to do a deal with another player, they just want to hold on to what they have, these are the ones ruled by fear and wish to clutch on to their pile of cash in case by doing anything they may reduce it. They like certainty, and the less variables involved the safer they feel. They will typically end up losing the game. 

Then there are those who don't want to do a deal because they feel by doing one it will always be to their disadvantage, as why would someone do a deal with someone if the other person comes out on top. They cannot envisage a win/win situation by doing a deal with someone. It must be a win/lose situation. And therefore unless they are wiping the floor with someone they will not do a deal, which means they probably will never do a deal, and again typically end up losing. 

There are those who are reckless risk takers, they play big. The problem is either they could win big or end up broke, typically very quickly. A little strategy and direction to taper this emotion is a good combination. 

As with life, there is also the element of luck; if Lady Luck smiles on you and delivers the right opportunities you will float to the top more easily. 

There are many more psychological scenarios, apart from the ones I have mentioned here.

The game shows and proves an important principal regarding property. There are only a fixed number of properties, as the game goes on money has less and less value. There will come a stage where the properties have run out, meaning players can now only purchase from other players. At this point a property is worth whatever one person is willing to purchase it for, and the other wants to sell it for, with the sky being the limit.

This seems rather like some pockets of London, planning restrictions are so tight, with many listed, the properties as good as fixed, not only can you not build any more, it is very difficult to add any square footage to the ones which exist. 

To put this in perspective, if we look at a painting done by none other than the renowned Picasso you will see the valuable nature of holding property. 

One piece of work he did is known as the Women of Algiers which sold for £116m in New York in 1997, this painting went up by 462% in 18 years; roughly 25% per annum, you can understand this. As he is dead, there will be no other paintings being produced. There is no comparison to this piece and with age it will increase in value. 

According to Nationwide London property prices have increased by 334% during the same period this equates to an annual uplift of 18%.

It would be problematic borrowing against a rare piece of art, whereas the borrowing for property is still relatively plentiful. You only need to put in 25% - 40% of the property value which means you only need to invest at the most half of the money in cash. This will almost double the return generated. Furthermore property gives you a yield, a monthly return. 

Bearing these factors in mind from an investment point of view you would probably be better off investing £116m into London property than even a rare piece of art.

When you look at the rise in property prices in comparison to a rare piece of art it puts things into perspective and reveals attractiveness of the London property. 

There is also the basic principle of money which is continually being printed in huge amounts; during the credit crunch this was done in the name of saving the citizens and rescuing the banks. This means that anything which is physical and limited increases in value as money is printed literally from thin air. 

So here are two very important principles already. If you focus on holding onto money, you will lose the game. If you focus on owning properties, in the right locations, to generate money you will probably win.  

The important point is the location. In a class at university I remember the lecturer saying there are three important points to consider when purchasing property, and they are Location, Location and Location. This is the overriding factor when considering property investment, if the location is good, even if the other factors are not favourable, the location will probably override all other factors. 

Mayfair and Park Lane on the board are the most expensive to purchase and command the highest rentals. These are the ones which players focus on. If you concentrate on prime locations, and are lucky enough to own a complete set which then allows you to build houses you will probably end up winning the game. 

If you wish to put these two principles at work straight away we have two properties in Notting Hill, a prime location, for only £675k each. The contracts are in and the deal is waiting to be done NOW.

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