‘Robopaddy’ has suddenly realised that buying property abroad doesn’t spread the risk.

Back in 2005 a strange creature emerged out of the Irish property boom. He could be seen at regional airports all around Europe, but particularly in Britain.

You might have seen him, sweating, laden down with paperwork, Celtic away strip with unsightly wet patches under the arm, squinting up at the monitor to see just how long the Ryanair flight from Teesside is delayed.

What does he care: he has just picked up half a dozen council houses in South Shields, just outside Newcastle, for half nothing. Do you remember the movie Robocop? Robocop went around the world trying to save the place, whereas our new character – Robopaddy – flies around the world trying to buy the place.

Like Robocop, he is an invincible good guy – an indestructible force – driven by his own mission, which is to buy as much foreign property as humanly possible. Robopaddy lives on his wits, by the seat of his pants. He is curious, adventurous and loves life.

He has never been to Newcastle until this one afternoon driving around in the company of a matey Geordie salesman. It’s not too bad really. The conversation revolves around Newcastle United, Shay Given and Gazza. The city is in the middle of its own buy-to-let boom. Rick the salesman sells about 40 per cent of his stock to Irish investors. They deal quicker and in bigger amounts than the equivalent English buyer, ask fewer questions and cough up deposits on the spot.

Rick purposefully drives him though the better areas, the leafy redbrick suburbs with clean Waitrose shopping centres, red pillar boxes and alarmingly precise road signs – all staples of upright, balanced, suburban England. The place is a shrine to red Vauxhall Astras, Courage pubs, dyed blond hair, sports and leisure wear and ill-advised Argos male jewellery endorsed by a premier league footballer.

This is Ant and Dec land – the interface of middle England and underbelly England which the Labour government is intent on privatising — and Robopaddy is a beneficiary, or at least he hopes he is. He checks out the show house, which has been vacated and tarted up for him. Neighbours peer over walls and from the white van parked in the driveway.

He’s seen enough, shakes on the deal, and by the time he is sitting down to his pale ale at the Formica tables in Teesside Airport, fruit machine flashing away as another work-shy feral Darren or Lee gambles away his giro, Robopaddy has added to his portfolio: ‘‘11 per cent yield – where would you better it?”

Today, in early 2008, Robopaddy is worried. His overall portfolio is looking shaky. He tried to offload the Geordie council houses and got nowhere. More to the point, he is now realising that his entire portfolio is interlinked.

It is slowly dawning on Robopaddy that the global property market, which he had argued was diversified, is in fact one large bet on a single asset class. Most crucially, this bet is subject to contagion.

When one market suffers, others do too. This idea of intertwining bets and contagion was reinforced for me years ago when I met an investor on a business trip to Hong Kong in 1997. A savvy investor, facing losses in Asia, he started asking questions about Ukraine where he had exposure. He flogged his Ukrainian assets to cover his Asian losses, despite the fact that there was nothing intrinsically wrong with the Ukrainian economy. The same is happening now in the global property market.

The Irish, who have been the biggest foreign investors in Britain, are now trying to flog their British assets to cover losses in Ireland. The only problem now for Robopaddy is that the British market is weakening quickly.

It is becoming apparent that the credit crunch in Britain is leading to the following dilemma: British banks are demanding more credit to restructure their balance sheets but other British banks are lending less because they are trying to do exactly the same. So the home builders caught in the middle with huge leverage are getting hammered. This is the macroeconomic backdrop which explains Robopaddy’s anxiety.

Because housing markets move slowly and underlying problems take months and years to play out, the best way to get a snapshot of the fundamental state of the British property market is to examine listed property shares. The picture is not pretty. For example, British Land’s share price has fallen by 45 per cent in the past year, wiping out all the gains it made in the past four years.

Last week, Britain’s second largest home builder announced that house sales had fallen by 14 per cent in the last quarter of 2007.TaylorWimpey, Britain’s largest home builder has seen its share price fall by almost 60 per cent, while Barratt Development has lost more than 70 per cent. Meanwhile, weakness from the housing market has seeped into industry with the Confederation of British Industry revealing this week that 44 per cent of its survey respondents confirmed declining order growth and 70 per cent believed the credit crunch would last longer than six months.

All this should be prompting the Bank of England to cut interest rates but it is in a catch-22 situation because underlying inflation in Britain is on the rise, particularly with food prices, which have risen by 5.3 per cent, and petrol prices, which are up 16.5 per cent. Even if the Bank of England wanted to cut interest rates to save the housing market, higher inflation prevents it.

This policy confusion is weighing very heavily on sterling which is below its all time low against the euro and still falling. Interestingly, the last time sterling was so weak, Ireland had a currency crisis prompting a major devaluation in 1993. This time we can’t devalue, so all the pain of the adjustment will be felt in the real economy, mainly through ever weaker house prices.

For Robopaddy – the swashbuckling property prince of a few years back – it’s becoming clear that all markets are related. The English market, which many Irish investors deemed to be stronger than our own, has proved over the past few months to be just as vulnerable. It is now not easy to sell in one housing market to offset losses in another. What goes up together, goes down in unison.

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