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High property prices may be bad for the economy

“Guten morgen leerlauf wissenschaftler”

It was Frau Schroeder, wearing a morning gown early on a Saturday morning. She always called him idle scientist. An allusion to the master’s hibernation, yes thats the best word for  his weird after meal indulgence, in which he sat in a somewhat comfortable position, usually on a sofa and leaning his head onto a pillow or the wall, and for a few minutes shut his eyes, face bearing  a semi-pontifical expression as if in deep spiritual meditation. When you talked to him during such moments, he lazily responded with what appeared to be the least effort needed to utter each word, but never opened his eyes, and if you asked him what he was doing, his response was always that he was ‘healing and gathering his strengths’. My bet is it had more to do with the gluttonous knock off effect of a full tummy than anything else.

“So property prices are up again?” asked frau Schroeder,  gazing out of the kitchen window and adjusting her gown.

“Well, what – can – we – say” responded the master, pausing between each word.

“For a start, the economy is suffering, does it make sense that prices of property and commodities are rising.”

“Not an economist darling, but the simple answer appears to be  no”  he paused again “Ask Bern, he usually has some colourful opinions on,” he hesitated. “On things”. The reference was to Lellouche, whose full name was Bernard Timothee Lellouche. For a moment I thought Lellouche must have been still asleep, or out as i  hadn’t seen him come in last night.

“Bern’s not in, he texted last night” she answered dryly. “At Francesca’s” she added, making a slicing gesture with her palm across her neck.

“Oh, well,  goodluck to him.”

Francesca was Lellouche’s on-off girlfriend, and a hot-head of many sorts. She was clever and pretty, infact very pretty the master once  joked that she was the perfect candidate for a ‘recurring one night stand’. That while all your manly instincts told you to date her, you couldn’t because her character wouldn’t let you get that close to her. But you could at least hook-up. And it was all because of her peculiar attitude, one of the spoilt types who would laugh at something today, yet get extremely offended, I mean go ballistics, by more or less the same type of joke tomorrow. Unpredictably immature if not hormonally unstable.

“Ok, we understand why fuel affects everything, food prices and the like. But how about property, why are we paying too much for our rents / mortgages compared to the rest of the world, when the money just goes to the earners pockets. I can get a proper villa with a maid and a gardener in Morocco for £50,000, but i can’t even buy a chalet in London with that, why!?” She hissed.

“Tell me about it, Britain is unjustifiably overpriced” He opened his eyes looking dazed and smiled. I gathered that he must have been lying there for a while. ” The rest of the world says our prices are too high, the EU says that, you say that, I know that, but we won’t accept it. If you are a landowner in Britain, you’ll want to keep your prices up as high as the sky, because that’s what your creed says, and theoretically the higher you put it out for, the quicker you complete your mortgage, and if you don’t, you lose out, because they are more people offering high priced property than low priced ones, and in any case all the low priced pads are taken, so imperfect competition at its best.”

“Can I tell you a story”

“Go on”

” My client wants to start a business. He’s a guy who runs other businesses that are self sustaining, and he already employs 9 people in his other 2 businesses. Chap’s been fortunate. He says he’s got enough money to employ 5 additional people for at least a year, who he needs if his venture is to be even mildly successful. But he fears that the right buildings are located in the wrong places”

“How do you mean” asked the master.

” Well, the  story goes like this. If he is to get a warehouse type building, which he can use for storage and as a workshop, the cheaper buildings are located away from the main transportation routes leading to the airport / train stations, and he would have to spend a lot on transportation + Couriers, since he frequently needs raw materials to be brought in, and would constantly have to travel (with a fair bit of kit) to exhibitions and the like. If he goes into these ideal buildings he’ll pay less for rent, but more for transport. However, if he opted for a more expensive option, then he’ll probably be looking at paying more for rent, and less for transportation. The problem is he’s not too sure on which option would give him ‘more run’ for his money ”

“So here’s a guy whose got some capital he’s willing to spend, to try and create a new venture and potentially 5 jobs, and he’s being impeded by high property prices…mmmh, interesting ” said the master thoughtfully, his eyes searching the ceiling as if he were looking for an answer inscribed somewhere on it. “Haven’t thought about that before you know, I wonder who else out there faces a similar problem. Could this be a widespread problem, among employers?”

“I don’t know, certainly amongst small companies that want to grow, diversify, its probably an issue. But it just goes to show what we have created with this property boom. A system that while we were trying to achieve profits with our land, the knock on effect elsewhere has been to impede economic development and job creation.”

“And its not like the government legislates guide prices .. ?”

“No,this is neither China nor Iran, its a free market, anyone can charge whatever the hell they like for a piece of land.” He looked around mischievously “In fact the higher the price band, the more tax the government can claim, and it affects the council tax as well, so generally its in the government’s best interest that property prices be high. Further, who wouldn’t be suspicious of regulation that included guide prices?”




  1. Pingback: Leadership | Gnstr's blog - February 25, 2013

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