I have been away for a few weeks. I felt I should get out of here before the tsunami struck. Can’t be too careful when a giant rumour approaches the island.Part of my overseas mission was to take a look at London real estate. My brother and I had been thinking of buying a flat in London, using the proceeds of my Dad’s house. In the process of not looking very hard, I learned a number of things about real estate, money and life, and thought I might share them with you.

First off, we ruled out buying a property in Bermuda. Owning a condo here would require us to put all our eggs (and some borrowed eggs) into a single basket, not doing which is the first rule of financial management.

London seemed like a good choice, because it has a vibrant property market. Although neither of us lives there, we both like to visit from time to time. It is a city always on the brink of collapse, which I find stimulating (as an observer, rather than a participant). The social system in Britain, and especially England, is so utterly deranged that it’s fun spending time there, trying to work out how millions of people can be so incomprehensibly stupid so very, very often.

We started looking in the neighbourhood that my Dad lived in, St. John’s Wood in North London. We grew up nearby, know the area, and like it. Thanks to inheritance tax, however, we thought we might have been priced out of that market. Property prices in that part of London are as unreasonable as those in Bermuda, for the same reasons: soaring demand, limited supply and a booming financial market staffed by overpaid professionals.

Nonetheless, we pursued the notion. We found that we could afford an apartment with one fewer bedrooms than we wanted, and briefly considered rejigging our plans to suit. That bright moment was quickly quashed when we calculated what the costs of ownership would be.

First, acquisition costs. A mandatory building survey plus solicitor’s fees, would total about $5,700 (using, throughout, $1.90 to the Pound). Then there is stamp duty, courtesy of Gordon Brown, the miserable Chancellor of the Exchequer who detests private ownership of anything. In our price range, we’d need to pay about $28,000 in duty. That’s best part of $34,000 down the drain, for a start.

Then, annual costs. The annual service charge on a two-bedroom apartment in a reasonable apartment block would be about $16,000, we were informed. That’s supposed to pay for upkeep, but greedy managing agents pocket a good chunk of it.

Council tax, levied nominally on residents of Britain but also on property owners, would run $1,900, if we set it up right, allowing for a non-resident ten percent discount. A TV licence runs $250 a year. (We wouldn’t want a TV, but in Britain you have to pay the fee if you own a DVD player and a monitor.)

Add in standing charges for utilities, which might be $500 a year before we switched anything on, and we were looking at best part of $20,000 a year in running costs — after spending every penny we own, and more, to buy the apartment in the first place.

To that has to be added the cost of money. On a purchase price of $900,000, it would not be difficult to earn interest (or pay it on the mortgage) of $45,000 a year. So the total basic cost of owning the apartment would run something like $93,000 out of pocket in the first year and $65,000 a year thereafter. That ignores furniture, internal decorations, the cost of utilities consumed and headache tablets.

So the flat would have to appreciate in value by more than ten percent in the first year and 7.2 percent a year thereafter. Similar apartments have done just that in the past few years, but there’s no guarantee that will continue.

Unlike Bermuda, however, if you don’t like the prices in a particular neighbourhood, you can walk a few hundred yards and find yourself in a cheaper one. So we did just that, and started looking in Swiss Cottage. If you hadn’t grown up there, you would barely know the difference. Apartments are cheaper and service charges are lower, but you’re in a different borough, where few work and head tax is accordingly much higher, while services are poor and rare.

Between us, my brother and I might spend 50 nights a year in the pad. Sitting in a nice hotel nearby, we worked out that spending our time in the hotel would cost us, say, $16,000 a year, less if we join the hotel club and earn free nights. No furniture, no head tax, no upkeep, and someone else makes the bed. Plus, we wouldn’t have to carry a mortgage or issue direct debits to everyone in sight.

Finally, there is the risk that a future British Government, say one headed by a dour Scottish killjoy, might change the law retroactively and suddenly tax the living daylights out of non-resident property owners. They’ve done it before. (There are ways of avoiding that possibility, but they all cost an additional several thousand bucks a year.)

So, economically, buying an apartment in London would be a gigantic bet that would leave us penniless and annually encumbered. With a recession staring Britain in the face, and a dour Scottish kill-joy about to become Prime Minister on an avowed tax and destroy programme (not to mention the view that a dirty bomb going off in London is thought to be not a matter of ‘if’ but of ‘when’), the chances of the apartment retaining its value in the next few years look improbable.

Finally, the Pound is currently heavily overvalued against the dollar. A number of US investment houses are forecasting that it will fall from today’s $1.96 to $1.82 within a year, and I doubt the Pound would stand much above $1.50 once Mr. Brown finishes weakening the economy in, say, five years. In dollar terms, we could lose a quarter of our investment that way.

So we cancelled the idea. I will remain homeless. We’ll probably put the money into something less speculative, like tulips.