What we are worth

It is tossed off so easily as if it was definitive, an all embracing understanding, "My house is worth half a million" or "My house is worth £90,000", if you happen to live in a northern blighted town. Then the cough and half-apology of "well it is only worth that if someone else is prepared to pay that much". As we begin our descent into the substrata of meaning, "Of course I cannot get any benefit from that worth until I die or buy a smaller cheaper place". None of this matters in any real sense, it is just flotsam of life, until you make the connections.

UKplc borrowed heavily on the basis of the future continuing rise in its property values. That borrowing, mainly in mortgage debts taken on, was used to fuel a spending bonanza, the like of which we have never seen this side of the WW's. We could borrow so heavily because, property, for the man in the street, houses, just keep getting more and more expensive, keeps growing in value. Aside from gold, property was the next copper-bottom bet. And a bet it always was. 


So what is a house worth? Certainly not just its replacement costs, the cost to rebuild it, other than in a very circuitous self-referencing way. Not even for its build cost plus the value of that scarce permission to build. Once a habitation permit exists, it exists and is very hard to take away. What it is worth, in essence, is the gut feel of what it is in comparison to other properties nearby and what other similar properties have sold for that are comparable. There, that is the worth of a house, a gut feel. Let us hostage all our futures on the basis of this. A gut feel sustained to some degree by a scarcity of perceived 'desirable' properties available. This perceived scarcity fuelling the rush to snatch what is going at whatever the cost, spiralling the costs ever up.
 
There are a few things in life you take as rock solid, hospital care for us when we are sick, policepersons are there to help not to harass you, within the four walls of your house you are safe and buildings last for ever. We grow up surrounded with buildings that have been there for all time. Building just do not fall down and are seldom demolished in our own experience. The buildings we put are now are nothing like the way they used to be constructed. Building in the past was craft based using easily obtainable materials and relied on accumulated experience of what worked with large amounts of built-in redundancies. Nowadays materials are honed to the least essential to achieve the required effect and we depend on calculation to prove that the structure will stand the test of the weather. Previously there was several overlapping redundancies of structure. Now we design for a life of thirty years, or if you are lucky enough to live in a Housing Association home then sixty years. That is all. A thirty years life is the design norm. It will almost certainly not fail in less but the structures integrity relies on many, many small components which may or may fail after thirty years. No one knows, we have not had a century of experience of modern building practices to know where the weak points are. We build a time limited product. Yet we value that same product on the basis that it has an indefinite life. We value houses by their location and not on the floor area provided nor an estimate of the remaining life expectancy or even the amount of repair or upgrading required. It is nonsense but that is the market we have and accept blithely as the norm.

When you live in a fantasy world, do you close your eyes, ignore the contra evidence, and carry on regardless? No of course not. You stop, take notice and start the search for some other path, that leads away from the present fantasy-land nonsense. With UKplc mortgaged up to the hilt in shortlife property with repayments based on a longlife, we have to change tack. Again no simple easy answers. Harking back to another post (Right to Plunder), first step remove freehold, only a long term lease is possible with a commuted sum to restore it back to fertile land. No one can 'own' our land. Secondly the Council Tax is based on per person floor area with a rebate for properties below a set norm and a tax on attached land, setting dependant, and again rebated for those below a norm. Such that City dweller would expect no land whilst out in the country some M2 of land would be a norm. Those two measures will push the market into greater visibility of square footage, land take, life cycle costs and together with the greening measures may take our housing away from the fantasy place it currently bloats in.