Is your Evesham home your castle? and its value ?
4th February 2011
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The Value of Property versus Money?

What’s the closest thing to most Englishman’s heart? I think the most common answer will be his house.  Harping back to the days of Castles, most people attach more value to their property than any other asset they own.  Since the 1980’s this feeling of wealth has been compounded by the English Clearing Banks reliance on property for providing security for loans, whether they be for private or business use. This reliance is more prominent today than ever before, and the difference between market value and forced sale value is stark.

Who sets a value for property? Probably the quickest retort would be the market, but behind the market, there is whole raft of professionals called surveyors who work quietly away studying, analysing, and talking about the “Property Market”. I regularly get asked in the pub “What’s the property market doing?” and it is never a simple answer, because the “market” comprises many facets, all of which meld together to create that impression of wealth. The one thing that is evident, however, is that historically Property has always proved to be a good hedge against inflation.

So where is this article going. I would like to quote Thomas Jefferson, who was president of the USA. In 1802, he said “It is incumbent on every generation to pay its own debt as it goes. A principal which if acted on would save one-half the wars of the world.” In another speech he stated that “I believe that banking institutions are more dangerous to our liberties than standing armies.  If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property- until their children wake- up homeless on the continent their fathers conquered.” 

He was talking about America, but having just read the Sunday papers; I cannot help but draw similarities with the U K economy. As I sit here now and write this article, I really feel quite let down by the politicians who have lead this country for the last forty years.  One headline this week states ”Banks cash in on borrower’s pain.” Here we are informed that mortgage lenders that rushed to raise interest rates last week have been accused of profiting at borrowers expense when swap rates –wholesale lending rates- collapsed on the news that the economy contracted at the end of last year.

Another article in the same paper then gives guidance on how to beat stagflation.  For those of you who cannot remember the 1970’s, stagflation is the phenomenon of rampant inflation occurring whilst the economy stagnates.  At the moment we are witnessing one of the biggest public spending cut backs we have ever witnessed. On the armed forces, we cannot afford to put aircraft in one of the new aircraft carriers that is being built. They have just scrapped Nimrod, the planes which have cost goodness knows what financially, have just been sent for scrapping and shredding, and the Government is also looking to reduce man power across the forces where ever it can. 

This week, I went to a budgetary briefing with our local council, and was informed that they had put in place plans to cut their total expenditure by £2 million in this budgetary year. They have even gone into minute detail about how they are going to only cut the lawns 16 times, rather than 17 times, an annual saving of £8,000. No posts will be replaced this year, so that employee numbers will be reduced by natural wastage.  The plan was well thought out, and it is obvious given the circumstances created economically over the last decade, the Council were doing their best to cope with the economic hand they have been dealt by central Government.

Working as a commercial surveyor in Evesham, I can count on one hand the number of new lettings we have completed for manufacturing companies looking to create new factories in the area, with a view to creating new products made from raw materials. We still have a very active horticultural industry, and the corresponding processing and distribution companies locating in the area looking to serve the industry. Locally in Worcester, the one big exception to this dearth of new production facilities is the planning permission given to Worcester Bosch, who is looking to create a new manufacturing plant in the area. As an individual, I very much look forward to buying their products in the future, and will take great pride in thinking well these were made down the road from Evesham.

As a nation, I feel we must reverse this decline if we are ever to hold our heads up again with pride.  The Politicians must create an entrepreneurial environment for people to have a go and create something.  We must stabilise input prices as a matter of urgency, hydrocarbon prices are increasing so quickly at the moment, enterprise cannot absorb the ramifications, without price rises, hence the inflationary affect.

Charging void rates on empty commercial buildings is a tax on capital.  Making Landlords pay full rates on empty buildings will not only lead to the demolition of many good quality commercial buildings, but also stifle inward investment into property. Who can afford to build new industrial buildings, and then pay tax on them for lack of a commercial tenant?  A Worcester Agent last week claimed that he had let a large commercial building at £1 per Sq Ft rent in order to let the commercial landlord avoid paying void rates. These commercial buildings form part of the national wealth, and need to be preserved for when there is an economic recovery.

From the private individual’s perspective, his home will remain his castle, and in the majority of cases, his main form of principal savings.  It will be essential to ensure that personal mortgages do not increase to such dizzy levels that cannot be maintained by what is likely to be falling incomes as the effects of stagflation take hold. If this does become out of control, then it is possible that the volume of repossessions may lead to a reduction in the value of housing as a whole.  At that stage the second prediction quoted in this article made by Thomas Jefferson will have come true. The economy really does need careful handling by politicians in order to avoid a double dip recession, and the price of failure will beyond comprehension by this count

Written By Tony Rowland, Commercial Partner- Timothy Lea & Griffiths Ltd


About the Author

Alan J

Member since: 10th July 2012

Whilst running The Best of Evesham I am also locally focussed on doing what I can for the local community in profiling what is going on.A prolific user of Social Media-We offer Social Media Management...

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