Stunning economics here

The FT reports this morning that:

Since 2012, developers [in London] have begun building 44 per cent more homes than they have managed to sell. Last year, work was started on 1,900 luxury apartments, but only just over half have sold.

The reaction being:

I’m forever blowing bubbles,

Pretty bubbles in the air,


That’s the tale of the modern London apartment block for you.

And that’s the tale of market failure.

High prices call forth more supply which then lowers prices.

That’s market failure?

31 thoughts on “Stunning economics here”

  1. OT but more Murphy.

    He applauds in another blog the grant of a further Fair Tax Mark to coffee shop ATM. His last sentence of this blog is a belter though:

    “Consumers looking to support businesses committed to paying their fair share of tax can find the more than 1,500 shops and offices of Fair Tax Mark accredited organisations at”

    You would think the FTM was a pretty substantial thing from that, 1,500? But of course you and I know that these 1,500 form part of only 35 or 36 actual organisations with the FTM, a pitifully small number for an accreditation that has disastrously and laughably failed.

  2. That’s yet another time that he has forecast a crash. I think November 4, 2017 was the last time. He is also precisely wrong. There has actually been very little sign of increased supply of housing in the economy as a whole. This is backed up by notayesman here

    Ironically one place where there has been a bit of a property bubble is Portugal, especially in Lisbon.

  3. “Paul Monaghan, Chief Executive of the Fair Tax Mark said: ‘Consumers are rightly angry when they hear of multinational coffee shops paying little or no corporation tax in the UK – sometimes year after year after year.'”

    Too right, we’re angry. We’re angry at all the lies told by TRUK and FTM about tax avoidance.

  4. On the other hand if you wander round established estates and count the empty rooms, add the number of actually empty properties, then second and other holiday homes and lastly add the student effect, many wanting their own flats etc. there is in fact no shortage of property only bad distribution made possible by crackpot policies and taxation.

  5. @Bravefart

    AMT didn’t pay any tax in 2016 according to their latest accounts, indeed a credit of £164k, and paid about £90k in 2015. The 3 directors paid themselves approx £650k from what I can see. (Not an accountant so I may have misread)

  6. “The 3 directors paid themselves approx £650k from what I can see”

    Fair play if they did of course but I wonder what the employees manning the shops at the railway stations get per hour and what the ratio between lowest and highest paid at the company is….

  7. AMT coffee, sorry.

    That makes more sense. The other one sounded like its produce would leave a nasty taste in the mouth.

    Ironically one place where there has been a bit of a property bubble is Portugal, especially in Lisbon.

    First sign of it was some chancer trying to punt Portuguese properties on this blog.

  8. So how many homes have they finished building in that time period and what proportion of those were sold after 3 months?

    I know people can and sometimes do buy before the property is finished but I’m also sure it is probably much easier to sell something once it is at least substantially finished. How many of those flats ‘started last year’ were started 3-4 months ago?

  9. MC – ATM coffee is actually quite a delicacy and so people are prepared to pay the expensive prices.

    You’ve heard of coffee defecated by civets?

  10. You seem to be implying that its good economics to build too many expensive flats and then not be able to sell them. So much for the pro-LVT blast in your more respectable publication.

  11. The Meissen Bison

    DNR is unaware how markets reach equilibrium but since he manifestly lost his a long time ago that’s understandable.


  12. You should thank me MC. The chiado part of Lisbon is up 40% in a year against 10% in other places. Just sorry I didn’t tip you off earlier

  13. The joys of Captain Potato’s blog

    Graeme says:
    March 6 2018 at 2:40 pm
    You should look at Harworth plc, busily working on recovering brownfield sites. Applications within the planning system include 1,308 residential plots and 325,000 sq ft of commercial space, and these form part of a wider pipeline of applications over the next three years that will cover more than 4,500 residential plots and 5.9m sq ft of commercial space. Lots of work going on there

    Richard Murphy says:
    March 6 2018 at 3:12 pm

    Graeme says:
    March 6 2018 at 8:49 pm
    So? One of your commentators said

    Brownfield sites that blight our cities – where there is already infrastructure for utilities and road access for example which brings down the cost of building just sits there doing nothing because no one can be arsed to clean it up properly and make it fit for use. A job for an enabling State if there ever was one.

    I supplied a name of a company actively doing just what PSR wanted. I am sure there are many others

  14. Well done AMT coffee for allowing the 84 year old mother of the founding directors to hold shares. Along with a trust set up when their dad passed away. Although it isn’t clear who the beneficiaries of this trust are. And it isn’t immediately obvious why they would need two the classes of share that the company has. Although I know some nifty tax planning can be done with this set up.

    But we know that AMT coffee paid dosh to get their Fair Tax Mark and that FTM won’t reveal any information from any of their checks or what explanations they were given. So that’s OK.

  15. “Fair play if they did of course but I wonder what the employees manning the shops at the railway stations get per hour and what the ratio between lowest and highest paid at the company is…”

    Based on the last coffee I had there whatever they’re being paid is more than they deserve.

  16. “That’s market failure?”

    Yes. It is a market failure, if the whole thing is being propelled by a load of shitty, cheap ethnic money that is mooring up in London because it would either be stolen somewhere else, or there are restrictions upon non-domiciled foreign nationals owning property in other locations, precisely to avoid this scenario.

    The result is a load of vacant, 2001-style monoliths that sit dark at night because no-one is actually living in them.. The knock-on effect is then one of wishing you luck buying a two bedroom flat in zone 6, because it now costs more money than you will ever earn by working a real job.

  17. Fair play if they did of course but I wonder what the employees manning the shops at the railway stations get per hour and what the ratio between lowest and highest paid at the company is….

    We’ll never know as AMT have paid their protection money, the Spud isn’t interested.

  18. AMT coffee

    10 minute check of their Companies House records reveals.

    *28% owned by a Trust. We don’t know who the beneficiaries of the trust are.
    *84 year old mother of the directors owns shares. Maybe she contributes, maybe not.
    *Directors paid £300k+ despite company making losses and despite employees on below national living wage.
    *Directors have been lent £1m+. Had they been PAID £1m tax and employers/employees NIC would have been in excess of £0.5M.

    But I did have to look for 10 minutes to find this. I wasn’t just paid a big wodge to give them a spurious tax mark.

  19. In Llandudno prices are low. We need decent prices. We require dencent prices for us to have good homes to live in.

  20. Andrew C

    Well done on your research. Ritchie is either too stupid to realise that almost all tax planning by privately owned companies is done at the shareholder rather than the company level or, more likely, he doesn’t care as long as he pockets the cash. It was the same with Stemcor, the use of an offshore trust and its disclosure under the LDF was fine by him as it was done by Margaret Hodge and family.

  21. Diogenes – “AndrewM60, isn’t the failure more on the planning/regulatory side?”

    To an extent yes, but consider what regulatory “failure” potentially comprises: I’d argue that just about any attempt to impose restriction upon the sale of land, the construction of bought-off-plan apartments and worst yet, the open purchase of property that is then simply left unoccupied (and sometimes even unmaintained) as it appreciates in value, all would be deemed to constitute restrictions upon the free movement of capital for Tim Worstall and others who subscribe to the idea that you should be free to invest your money without arbitrary impediment.

    From there: Good luck living in Hitchin and getting up at 5am for your London commute. Scratch that, good luck living in Peterborough, and all of the time, the 2001 London monoliths sit empty because they are predicated around silly money. I’m glad I don’t have to bother with any of this.

  22. Well done AndrewM60 for your ability to understand Tim’s mind. Do you have any evidence for your assertion that he thinks it a good use of resources to build these monoliths that obsess you so much?

  23. @ Andrew M60
    As a believer in Adam Smith’s proposal to finance government from a tax on the increasing value of land which the gov’s encouragement of commercial activity should produce and the previous theories of the Physiocrats plus the later Land Tax theories of John Stuart Mill and Henry George,I should say that TW is definitely not someone who believes there should be no public sector involvement in the land market. Rather the reverse : see his article on John McDonnell. and LVT in his new venture, the Continental Telegraph, which seems to be his attempt to escape the parasites who infest this blog who sincerely believe that if public sector action puts up the value of their land they should keep it ; the Conservative Party was largely founded on this (lack of) principle among large landowners who later realised they could secure the votes of the lower orders by encouraging popular homeownership (= state guaranteed untaxed capital gains in the land value under the dulce domum).

  24. Diogenes – They don’t particularly obsess me. As in “I’m glad I don’t have to bother with any of this.”

    ….As for “evidence,” how about scrolling upward and reading the initial blog post? Or anything else that he’s written in respect to the freedom to spend your money where you like, but if misdirected that can lead to asset price inflation?

    The country might ostensibly benefit from an expansion of real estate in locations where it is relevant, but if those properties are not then being let to real human beings, is it a benefit at all? Or even parasitical upon real markets and needs? From there, is it distorting the real market?

    TBC…You do realise that it is possible to misallocate a resource, right? And that it can then have an external effect upon third parties? And that London contains a lot of dodgy ethnic money seeking to be moored up somewhere where it isn’t going to be stolen? With the English it is often necessary to point reality out: I.e. what goes on elsewhere in the world.

    I live in Switzerland – They have laws to prevent this garbage and they are not even that complex, suggesting either that the inhabitants of planet London feel they have nothing to learn from the rest of the human race, reality is different inside the M25 or that the whole situation is government policy to engineer a fake building boom and delude the public that the UK economy is going somewhere:

    Non EU/EFTA means you must live in the property that you own:

  25. Glad to know that you realise that you are insane, AndrewM60.

    It seems that you do not understand that real estate in the UK is not a free market.

    Thanks for telling me that Switzerland does not have bank deposits that do not belong to Swiss residents.

    When you have a real point to make, feel free to make it.

    And why are you so obsessed with these monoliths?

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