Editorial – Property investment – What is it worth?
| DOI | https://doi.org/10.1108/JPIF-03-2022-193 |
| Published date | 09 February 2022 |
| Date | 09 February 2022 |
| Pages | 117-118 |
| Subject Matter | Property management & built environment,Real estate & property,Property valuation & finance |
| Author | Nick French |
Editorial –Property
investment –What is it worth?
Introduction
It is funny how the COVID pandemic has changed our perception of life. It has changed the
way in which we behave and that, quite naturally, has changed how we use and view
property, which, in turn, using basic Ricardian economics, impacts upon its value. Let me
explain.
In lockdown, some of us started to feel that the enforced break from the rat race was an
opportunity to move away from the consumer economy of wanting everything now. Instead,
we started enjoying the free things in life: an appreciation of the countryside (for those lucky
enough to be locations where our daily exercise allowed such excursions), the mellowness of
rest and the quietness of just being. But, sadly for everyone so blessed, there were others who
found the whole experience str essful and distressing. Diff erent people in different
circumstances experience different things. That will always be the case.
But, there were some tangible observations about how people started to recognise the
worth of the things that they bought and “needed”in this the new normal. And again, I must
preface this observation by noting that this definitely did not apply to everyone, but there
were many households in the UK that had stable incomes but with less expenditure on travel
or going out or other recreational pursuits. In other words, they had an increase in their
disposable income and a limited array of possibilities for expenditure. Of course, due to the
uncertainty of the pandemic, people in such circumstances have increased their savings or
cleared their debts, but there has been enough people who have simply transferred their
expenditure to other avenues that were both available to them and to other pursuits.
And in the world of supply and demand, that changed everything. For example, as soon as
garden centres became “essential retail”in the UK, they, if you will pardon the pun, bloomed.
People trapped at home either through deliveries or social-distanced shopping quite naturally
decided to spend time and energy on improving their gardens and open spaces. And the price
of plants and ornaments and pots and soil and everything horticultural went up. Then the
supply of the same failed to keep up with demand and prices increased again. It was the same
with DIY, decorating, woodwork and home improvements; all of them boomed and prices
increased. It is simple economics in a microcosm.
So what does that have to do with property and value? It is really simple; people will pay
more for the things that they think are “worth it”. Now this can be explained in economics by
supply and demand curves, but let us talk about it in terms of price, value and worth. These
three little words are often mistakenly thought to be synonyms of each other, but the three
words that actually explain how all markets, and specifically property markets, work.
Price, value and worth
Worth is the driver of price. A successful bidder, at auction or tender, will be the one who
thinks that the item is worth the most and will outbid other bidders. This will determine the
price –the observable exchange point. And value is just a professional estimate of price when
there is no actual sale.
Markets are driven by changes in perceived worth. Prices rise when more people increase
their worth assessment of a particular item. Hence, people witnessed the rise in the price of
horticultural items during lockdown. But the same is true of rents and capital value of
Editorial
117
Journal of Property Investment &
Finance
Vol. 40 No. 2, 2022
pp. 117-118
© Emerald Publishing Limited
1463-578X
DOI 10.1108/JPIF-03-2022-193
To continue reading
Request your trial