UNSAFE AS HOUSES; We Are in the Middle of One of the Greatest Property Booms of All Time. but a New Book Is a Timely Reminder That History Is Littered with Fools Who Thought That the Bubble Would Never Burst

Daily Mail (London), June 19, 1999 | Go to article overview

UNSAFE AS HOUSES; We Are in the Middle of One of the Greatest Property Booms of All Time. but a New Book Is a Timely Reminder That History Is Littered with Fools Who Thought That the Bubble Would Never Burst


Byline: PAUL JOHNSON

THIS week a tree-house in Cambridgeshire went on the market at [pounds sterling]2million, a sure sign that we are in the middle of one of the greatest property booms of all time.

Houses in fashionable London valued at [pounds sterling]20 million or more are now numbered in hundreds. The million-pound house is commonplace. With interest rates low and money available for loans in plentiful supply, families are being encouraged to take out enormous mortgages, thus saddling themselves with debts running to many hundreds of thousands of pounds.

It's true that a mortgage is not an ordinary debt, the house providing the security.

Many houses have doubled in value in recent years and buyers of high-priced properties believe the purchase will double again, thus allowing them to sell it, pay off the mortgage and make a huge profit which is not subject to capital gains tax.

This may prove to be true. On the other hand, the experience of the Eighties property boom shows that house prices fall too, threatening the possessor with the dread punishment of 'negative equity', in which mortgage is greater than the sale price of the house.

Make no mistake: buying an expensive house in a boom market is speculation.

And speculation is a form of gambling, and that can bring ruin as well as riches.

A new study of booms-and-busts in history by Edward Chancellor, aptly entitled Devil Take The Hindmost, points to the central role property speculation plays in most financial crises.

A typical case is modern Japan, whose

economy has been in recession for an entire decade because its postwar boom, fuelled by an insane rise in land values, led to reckless accumulation of debt.

Chancellor calculates that between 1956 and 1986, the cost of land rose over 5,000 pc in Japan. By 1990, the Japanese property market was valued at 1,000 trillion yen or four times the real estate value of the entire United States. The grounds of the Imperial Palace in Tokyo, no bigger than the gardens of Buckingham Palace, were estimated to be worth more than all the land in California.

SO VALUABLE was space in Tokyo reckoned to be that plans were made to construct an underground city there, more than 300ft below ground. Now all is dust and ashes, and most Japanese banks are technically insolvent because they lent so much money for property investments which are now almost worthless.

Booms occur when goods are valued more highly than money.

A bust, followed by a slump, takes place when money reasserts its primacy and goods, including real estate, fall in price. Between the beginning of the boom and the onset of the bust is a period of growing unreality, climaxing in sheer madness, when the investing public totally misjudges the value of a particular sort of goods.

In the Eighties, Japanese speculators regarded a square yard of earth in Tokyo as a magic token of wealth. It was a form of earth worship, as insane as the most bizarre pagan cult.

Overvaluing land has a knock-on effect, most spectacularly illustrated in Japan by the rising cost of belonging to a golf club. During the boom, more than 20 smart clubs cost $1 million each to join - the Koganei Country Club had an entrance fee of $2.7 million.

The leading Tokyo financial paper had a 'Golf Club' index, as one way of calculating national prosperity. During a boom, almost any kind of goods can acquire this superstitious significance in the minds of speculators. In the very first European boom-and-bust crisis, in Holland in 1639, the magic object was a tulip bulb.

Growing rare tulips had long been a passion in the Low Countries, but during the 1630s it became a mania. At a time when the average annual wage was 300 guilders, the Semper Augustus tulip bulb, the most highly prized, rose to 2,000 guilders, and at the height of the boom rocketed to 6,000 guilders. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

UNSAFE AS HOUSES; We Are in the Middle of One of the Greatest Property Booms of All Time. but a New Book Is a Timely Reminder That History Is Littered with Fools Who Thought That the Bubble Would Never Burst
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.