Don't give in to fantasy

There's something about going on holiday that makes the British want to buy every house in sight. I'm guilty of it myself. When we were in Italy last month, I convinced myself I'd be happy spending every June at Lake Orta and whiled away hours thinking about a little flat overlooking the water. When we went to Croatia last year, I thought I'd buy a villa there. When we go to Cornwall, I think about buying my own house there (despite having an abundance of relatives there with whom I can stay for free) and sometimes, when the weather is particularly nice, I even think I could do with a house in Scotland.

Part of the holiday home buying fantasy is, of course, the idea that these houses won't cost anything. We think we'll rent them out for a few months a year and the rental income will cover our costs. At the same time, the value of our lovely Croatian villas/Cornish cottages/ Canadian ski lodges will rise 20% a year for ever, with the happy result that not only will all our holidays be free, but when we come to sell we'll get a great big pile of free money.

I have no idea why it is that the British feel quite like they do about having houses (it's pretty much unique to us and a few rich Americans, as far as I can see), but our obsession has come to a predictable end. So many of us now have holiday homes that holiday rents appear to have collapsed, in the UK and France at least. If they don't pick up, a lot of people are going to have a lot of trouble paying the bills on their second homes. On the plus side, those of us who have never given in to fantasy (deep down I know I don't want to holiday in the same place every year) can now rent houses on the cheap from those who did.

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But while a house abroad might not be quite the thing you want to buy this summer, you may be wise to invest your money away from home in some other way. The pound has weakened substantially of late, and while it may see a short-term bounce, there's little reason to think it will be anything more than short term. The UK economy is a mess and there isn't much that anyone can do about it.

The minutes from the last Monetary Policy Committee meeting suggest they are going to have a go at doing something about it by cutting rates, but that will just cause the pound to fall further and, worse, it will stimulate inflation and make holding sterling assets even less attractive. Add it all up and there's a good argument for having a little more of your cash than usual outside the UK. Not by buying a house in Spain, but perhaps by buying equities in Asia or Europe.