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Euphorion

What Is Property ?

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Posting this in a more obscure section of HPC to avoid the jihadis.

An important element of whether we are in boom or crash (rather than boring kboom) is determined by a definition of what property actually is. I'm not sure we need a rehashing of Grotius, Locke, Hume, Smith, Burke, Marx, Lenin etc so unlike the BTL jihadis, intelligent investors should avoid showing off (myself included).

Rather than close down discussion with detailed analysis, I'll refrain from detailed comment and let free discussion develop.

As a starting point, however, I want to ask is property a good or a service ? Certain capital goods have seen marked deflation over the years, certain services rabid and rapid inflation*. Which is it ? A number of important economic consequences follow from the correct definition.

If property is a good, then why isn't it declining ? Why is it inflating worldwide ? The simple answer is interest rates of course but if the holding cost of property is appreciating at services rate, all theory says this should impact on price. (And it certainly supports a sell-to-rent argument.)

If property is a service, why hasn't the service-linked-inflation-element led to a decline in capital good price ? In short, as the running or maintenance costs skyrocket, why hasn't the capital cost declined to take this into account ?

In addition, our use of services is relatively inelastic, our uses of goods relatively elastic, resulting in a decline in disposable income (not even counting the 500,000 Indian and Chinese engineers who will be eroding Western salaries in the near future), so there is an argument that the income multiples for gearing should contract and not extend (not counting lack of provision for pensions which should also lead to contraction).

This is a complicated subject so I'll let members contribute. But the BTL Jihadis who rant "the BTLers have hoovered up all the smarties, take them out and shoot them" just bore me silly.

In short, I am asking two questions: what is property ? and 2ndly if disposable incomes decline, account for the paradox of increasing multiples - a mirror of macro business engaged in greater risk-for-lower returns ?

* it's cheaper to chuck your kettle away than get it repaired , it's cheaper to sleep with your plumber than employ him etc

Edited by Euphorion

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As a starting point, however, I want to ask is property a good or a service ?

If property is a good, then why isn't it declining ? Why is it inflating worldwide ? If

It acts in the same manner as a commodity against a rising money (credit in this case) supply. ;)

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  • 302 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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