Fortsätt till huvudinnehåll

Landed Gents: fortunes built on bricks and mortar.

In last Sunday’s Observer Business (20 August 2006), Jonathan Russell commented that the (property) industry... “still has a selection of property barons who have made huge fortunes from this sector”, and then goes on to list half a dozen. Of one, it says that “like a lot of entrepreneurs... his buildings were more valuable than the businesses they created”.

Wrong. It isn’t their buildings that were valuable, it was the land they were sitting on. Sites in good locations are often worth more than the buildings that are standing on them. When this happens, it is time to redevelop. That land can be under-utilised in this way is due to bad accountancy - bookeeping practice does not reflect the underlying economics. One would have thought that a Sunday broasheet's business commentator was aware of this.

A cautionary tale
I once knew someone who used to travel from Hove to Catford, where he ran a menswear shop. This was the same journey as I made to work, and we used to meet on the train sometimes and talk about this and that. There was hardly ever anyone in the shop, so he can’t have done much business. One evening, we were discussing this, and he said that business wasn't very good but they got by because they owned the shop. I asked if his accountant charged a notional market rent against the profits – apparently he did not. So my friend did not know if he was just living off the imputed rental income – the rental he would have received if he had let the shop at the market rate. I suggested that he asked his accountant to check this out – it might be that he would have been better off to close the business and let the shop.

Shortly afterwards the shop was closed and re-let, and I met my friend in Brighton. He told me he had retired – at age 35 – and was running a rock band.

Kommentarer

Skicka en kommentar

Populära inlägg i den här bloggen

Importing people to sustain demand

I got involved in a discussion with a Youtuber called “Philosophy all along”. This was in connection with criticism of Trump’s policy of deporting illegal migrants, which he argued would be bad for the economy as it would reduce demand. This implies that there is a need to import people to sustain demand. There is no obvious reason why a population should not be able to consume everything that the same population produces. If it can not, then something else is going on. It is a basic principle that wages are the least that workers will accept to do a job. Wages are a share of the value added by workers through their wages. The remainder is distributed as economic rent, after government has taken its cut in taxes. Monopoly profit is a temporary surplus that after a delay gets absorbed into economic rent. Land values in Silicon Valley are an example of this; it's like a gold rush. The miners get little out of it. Rent and tax syphon purchasing power away from those who produce the g...
Skicka en kommentar
Läs mer

The dreadfulness of British governance

I wrote to my MP on two entirely separate issues recently. The first was to do with the replacement for the Inter City 125 train, which at £2.6 million per vehicle, is twice as expensive as it ought to be. The second concerned the benefits of a switch from business rate and Council Tax to a tax based on site values. In both cases, the replies were full of spurious, unsubstantiated assertions and completely flawed arguments. This is typical. You will not get an iota of sense from the government on any area of public policy at all - finance, economics, trade and employment, agriculture, housing, health, transport, energy. All junk. If you write to your MP you will invariably receive answers that are an insult to your intelligence, no matter what subject you are writing about. Of course they cannot understand statistics. They are innumerate. Whitehall is staffed with idiots with a high IQ. Look at their IT projects. And mind your purse, they will have that too.
Skicka en kommentar
Läs mer

How much more will the British tolerate?

The British are phlegmatic, tolerant and slow to rouse. Thus there was no great reaction after the terrorist attack in July 2005. The murder of Lee Rigby created a sense of outrage, but nothing more, since it appeared to be an isolated incident. Two serious incidents within a fortnight are another matter. Since the first major terrorist incident in 2001, authority has tried to persuade the public that Islam is a religion of peace, that these were isolated events, or the actions of deranged "lone wolves", having nothing to do with Islam, or to reassure that the chances of being killed in a terrorist attack were infinitesimally small. These assurances are are beginning to wear thin. They no longer convince. If government does not act effectively, people will take the law into their own hands. What, however, would effective action look like? What sort of effective action would not amount to rough justice for a lot of innocent people? Given the difficulties of keeping large n...
Skicka en kommentar
Läs mer