www.ebook3000.com New Economic Thinking and Real Estate www.ebook3000.com New Economic Thinking and Real Estate Danny Myers This edition first published 2016 © 2016 by John Wiley & Sons, Ltd Registered Office John Wiley & Sons, Ltd, The Atrium, Southern Gate, Chichester, West Sussex, PO19 8SQ, United Kingdom Editorial Offices 9600 Garsington Road, Oxford, OX4 2DQ, United Kingdom The Atrium, Southern Gate, Chichester, West Sussex, PO19 8SQ, United Kingdom For details of our global editorial offices, for customer services and for information about how to apply for permission to reuse the copyright material in this book please see our website at www.wiley.com/wiley‐blackwell The right of the author to be identified as the author of this work has been asserted in accordance with the UK Copyright, Designs and Patents Act 1988 All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, except as permitted by the UK Copyright, Designs and Patents Act 1988, without the prior permission of the publisher Designations used by companies to distinguish their products are often claimed as trademarks All brand names and product names used in this book are trade names, service marks, trademarks or registered trademarks of their respective owners The publisher is not associated with any product or vendor mentioned in this book Limit of Liability/Disclaimer of Warranty: While the publisher and author(s) have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose It is sold on the understanding that the publisher is not engaged in rendering professional services and neither the publisher nor the author shall be liable for damages arising herefrom If professional advice or other expert assistance is required, the services of a competent professional should be sought Library of Congress Cataloging‐in‐Publication Data Names: Myers, Danny, author Title: New economic thinking and real estate / Danny Myers Description: Hoboken : Wiley-Blackwell, 2016 | Includes bibliographical references and index Identifiers: LCCN 2016004467 (print) | LCCN 2016023019 (ebook) | ISBN 9781119048756 (paperback) | ISBN 9781119048732 (pdf) | ISBN 9781119048749 (epub) Subjects: LCSH: Real estate development–Economic aspects | Construction industry | BISAC: BUSINESS & ECONOMICS / Real Estate Classification: LCC HD1390 M945 2016 (print) | LCC HD1390 (ebook) | DDC 333.33–dc23 LC record available at https://lccn.loc.gov/2016004467 A catalogue record for this book is available from the British Library Wiley also publishes its books in a variety of electronic formats Some content that appears in print may not be available in electronic books Cover image: Getty Images © Hong Li Set in 10/12pt Sabon by SPi Global, Pondicherry, India 1 2016 www.ebook3000.com Contents Foreword viii Introduction: Setting the Scene The storyline Hindsight is a wonderful thing The writing on the wall Part A Resource Choices 11 Basic Economic Principles 13 Definition of economics 14 Resources (or factors of production) 15 Income and wealth 19 Investment 20 Property in a resource context 22 History of economic thought 25 Food for thought: The problems of inequality 29 2 The Language of Profit It’s all about profit The residential developer’s dilemma It’s all about yields Timing is everything Socially responsible investment Costs and price The circle of blame Food for thought: Is profit the measure of everything? 32 33 34 37 38 41 42 45 45 vi Contents 3 Real Estate Markets 49 Common sense price signals The Marshallian Cross The concept of equilibrium Property markets The basics of demand Demand for housing Demand for commercial property Demand for government property The basics of supply The stock of housing Stock of commercial property Stock of government buildings Supply and non‐price determinants Know your markets The unethical market? Food for thought: Behavioural real estate economics 50 52 54 56 60 61 64 65 66 67 70 72 73 75 77 79 Part B Financial Systems 83 4 The Macroeconomy and Financial Flows 85 The circular flow model The modern flow of funds model The perils of debt Food for thought: Flow of funds – what goes around comes around 5 Central Banks and Monetary Policy Ideology: In whose interests? What goes on in the traditional banking sector? The fairytale story of banking The market for derivatives: Weapons of mass destruction Alphabet soup Specialised real estate funding options Central banks Monetary policy before 2008: The conventional approach Monetary policy since 2008: The unconventional approach Food for thought: Cosmetic accounting 6 The Financial Recession The language of recessions and recovery A new world Herman Minsky (1919–1996) – ahead of his time? Why did no one see it coming? www.ebook3000.com 86 88 91 93 99 101 102 103 107 108 111 113 113 118 124 127 128 129 131 134 Contents Let the facts speak for themselves Central bank: Lender of last resort Where to look in the future Food for thought: Where is the next crisis coming from? vii 134 137 138 140 Part C Measuring and Forecasting 143 7 Central Government and Fiscal Policy 145 Macroeconomic targets Central government Fiscal policy Austerity economics Food for thought: An ageing population 8 Measuring and Forecasting Economic Activity Some general principles to watch out for Measuring economic growth Measuring income per head Measuring income distribution Measuring inflation Measuring unemployment Measuring international transactions Measuring business fluctuations Forecasting the economy Forecasting property markets Food for thought: The new (High Street) economy 146 152 154 159 161 165 166 168 170 172 174 179 183 186 189 191 194 Afterword 199 Glossary202 Webnotes210 References and Recommendations 215 Index 222 Foreword A new form of economic thinking began to emerge in 2008, prompted by the unforeseen financial crisis that had stumbled banks across America and Europe This catastrophic event also served to accelerate the ongoing academic debate about the relevance of some aspects of the mainstream economics curriculum, which had been simmering across Europe since the turn of the century As Professor of Economics Diane Coyle (2012) perceptively observed: it was patently obvious that a chasm existed between ‘the interesting questions of real‐world problems and the workhorse economics being taught to students’ In other words, the financial crisis had highlighted a tension that existed between those who taught traditional, orthodox, neo‐classical economics, and those making the case for a modern, heterodox, new economics No longer were the scientific methods offered by econometric (mathematical) approaches, or the precision of marginal returns, or economic models based on historical data, held up as sacrosanct The modern challenge for economists was to make sure that their work is set in a real‐world context; that the data and logic used confirms the current circumstances; and lastly, but by no means least important, that the growing scale and complexity of financial markets and products is acknowledged as a key part of economic analysis As students of this text will discover, rather surprisingly, much of this appears to be in sharp contrast to the established approaches taught by many mainstream economists New economic thinking benefits from this debate as it seeks to establish the virtues of a modern approach to economic analysis In a good number of chapters, this simply involves reiterating basic economic principles; improving the practical grasp of managing and using data; and recognising the importance of the financial sector to the broader economy In short, what is identified is a selective approach, and content that blends with the times and resonates with the current graduate community as they search for jobs in difficult times Another unique feature of this text is its emphasis on the importance of real estate Far too often, property is overlooked by mainstream texts but, given that many of the risks that banks accept when they provide loans are secured by property (be it residential or commercial), it can no longer be left out of the subject In fact, real estate assets are too often the ‘window dressing’ and the ‘noise’ that confuses the analysis of so many locked into the mind‐set of neo‐classicism www.ebook3000.com Foreword ix New economic thinking, therefore, brings into sharp focus the importance of property, finance and data handling as central tenets to comprehending today’s economy Furthermore, to enhance the approach several links to the internet are included as hyperlinks in the eBook and webnotes in the paperback The picture we end up presenting is not particularly neat and tidy with answers to closed questions based on tried and tested theory Instead, we present a view that is slightly more complex in order to develop insight into the practical tools available to economists and enable answers to the open-ended questions that will inevitably arise during your professional career This is not stated to provide some kind of excuse not to study economics, but to highlight why those who seek to understand the world of real estate need to embrace the language and methodology of 21st century economics 219 Minsky, H.P (1992) The Financial Instability Hypothesis The Levy Economics Institute of Bard College, Working Paper No 74 (May) Prepared for A Handbook of Radical Political Economy Edited by Arestis, P and Sawyer, M Edward Elgar: Aldershot, 1993 Minsky, H.P (2008) Stabilizing an Unstable Economy McGraw‐Hill: New York (Originally published in 1986 by Yale University Press: New Haven, CT.) Molior (2014) Who Buys New Homes in London and Why? British Property Federation: London Monbiot, G (2015) How the universities allow a corporate cult to capture and destroy their best students The Guardian, 3rd June Monbiot, G (2015) ‘The City’s stranglehold makes Britain look like an oh‐so‐civilised mafia state’ The Guardian, 9th September MPC (1999) The transmission mechanism of monetary policy Bank of England: London Available on the Bank’s website: www.bankofengland.co.uk Murgatroyd, G (2014) BCO Specification for Offices: Quick guide to key criteria 2009– 2014 comparison Gardiner and Theobold: London Myers, D (2005) A review of construction companies attitudes to sustainability Construction Management and Economics 23, 781–785 Myers, D (2006) Economics & Property: the Estates Gazette guide EG books (2nd edition) Myers, D (2012) Economics and Property 3rd Edition, Routledge: London and New York NBER (2010) Business Cycle Dating Committee, National Bureau of Economic Research: Cambridge MA Announcement, September 20 Neate, R (2014) Scandal of Europe’s Empty Homes The Guardian, 24th Feb, pp 1–2 OBR (2014) Economic and Fiscal Outlook Office for Budget Responsibility, December, Cm 8966 OBR (2015) Office for Budget Responsibility: Economic and fiscal outlook HMSO: London Presented to Parliament by the Economic Secretary to the Treasury by Command of Her Majesty (Cm 9024, March) OECD (2015) Focus on inequality and growth Organization for Economic Coordination and Development: Paris Orlowski, L.J (2015) From pit to electronic trading: Impact on price volatility of U.S Treasury futures Review of Financial Economics 25, 3–9 Osman, M (2004) An evaluation of dual‐process theories of reasoning Psychonomic Bulletin & Review 11(6), 988–1010 Ostry, J.D., Berg, A and Tsangarides, C.G (2014) Redistribution, Inequality and Growth IMF: Washington Staff Discussion Note, April Palma, J.G (2009) The revenge of the market on the rentiers – Why neoliberal reports of the end of history turned out to be premature Cambridge Journal of Economics 33(4), 531–538 Piketty, T (2014) Capital in the Twenty‐First Century (translated by Arthur Goldhammer) Belknap Press Private Eye (2015) ‘Selling England by the offshore pound’, 1st September, Issue 1400 Rajan, R (2010) Fault Lines Princeton University Press: New Jersey Resolution Foundation (2013) Squeezed Britain Available from: http://squeezedbritain resolutionfoundation.org Resolution Foundation (2014) Mortgaged Future: Modelling household debt affordability and access to re‐financing as interest rates rise Researched by Matthew Whittaker for Resolution Foundation: London RIBA (2011) The Case for Space: The Size of England’s New Homes London RICS (2002) Green Man Red Man A report authored by Cox, J Fell, D and Thurstain‐ Goodwin, M for RICS Foundation: London References References and Recommendations 220 References and Recommendations References RICS (2009) Sustainability and Commercial Property Valuation Valuation information paper 13, September Royal Institute of Chartered Surveyors Robbins, L (1932) An Essay on the Nature and Significance of Economic Science Macmillan: London Rogoff, K.S and Reinhart, C.M (2009) This time is different Princeton University Press: Princeton and Oxford Rogoff, K.S and Reinhart, C.M (2010) Growth in a Time of Debt NBER Working Paper No 15639 National Bureau of Economic Research: Cambridge, MA Roubini, N and Mihm, S (2011) Crisis Economics: a crash course in the future of finance Penguin Books: London and New York Roxburgh, C., Lund, S., Wimmer, T., Amar, E., Atkins, C., Kwek, J.H., Dobbs, R and Manyika, J (2011) Debt and deleveraging: The global credit bubble and its economic consequences McKinsey Global Institute: Washington, DC Samuelson, P.A (2010) Economics Tata McGraw‐Hill Education Samuelson, P.A and Nordhaus, W.D (2010) Economics (19th Edition) McGraw‐Hill/ Irwin: New York Sandel, M.J (2012) What Money Can’t Buy: The moral limits to markets Farrar, Straus and Giroux: New York Schiller, R (2012) Finance and the good society Princeton University Press: New Jersey Shapps, G (2011) Think outside of ‘identikit Legoland homes’ Ministerial announcement, March DCLG: London Sharpe, S.A and Suarez, G.A (2014) The insensitivity of investment to interest rates: Evidence from a survey of CFOs Finance and Economics Discussion Series Divisions of Research & Statistics and Monetary Affairs Federal Reserve Board: Washington, D.C Skidelsky, R (2010) Keynes the return of the master Penguin: London and New York Smith, G (2012) Why am I Leaving Goldman Sachs New York Times, 14 March (letters page) Snowdon, C (2014) Closing Time: who’s killing the British pub? IEA: London Solow, R.M (2009) How to understand the disaster The New York Review of Books, LVI 8, May 14–27, 4–8 Stevens, M (2015) Competitive goods market Unit in The Economy Curriculum Open‐access Resources in Economics, CORE: Ebook Stiglitz, J (2010) Freefall: free markets and the sinking of the global economy Penguin Books: London and New York Stiglitz, J (2013) The Price of Inequality: how today’s divided society endangers our future W.W Norton and Company: New York and London Stiglitz, J and Akerlof, G (2009) A new economics in an imperfect world The Guardian, 28 October Sutherland, D and Hoeller, P (2012) Debt and Macroeconomic Stability: An Overview of the Literature and Some Empirics, OECD Economics Department Working Papers, No 1006, OECD Publishing: Paris Taylor Wimpey (2011) Results for the year ended 31 December 2010 [online] https:// www.taylorwimpey.co.uk/corporate/investor‐relations/reporting‐centre/2011 Thaler, R.H (2015) Misbehaving: The making of behavioural economics W.W Norton and Company: New York The Economist (2014) Fast Times The Economist, April 5th The Economist (2014) Rise of the place‐makers, The Economist, 16 August: 21 The Economist (2015) The Never‐Ending Story: first America, then Europe, now the debt crisis has reached emerging markets The Economist, November 14th The Economist (2015a) Watch Out The Economist, 13th June The Economist (2015b) What’s wrong with finance? The Economist, 1st May www.ebook3000.com 221 Tucker, P (2009) The repertoire of official sector interventions in the financial system – last resort lending, market‐making, and capital Presented at the Bank of Japan 2009 International Conference Financial System and Monetary Policy: Implementation Bank of Japan: Tokyo, 27–28 May Tucker, P Hall, S and Pattani, A (2013) Macroprudential policy at the Bank of England Bank of England Quarterly Bulletin (Q3), 192–200 Turner, A (2010) After the Crises: Assessing the Costs and Benefits of Financial Liberalisation 14th Chintaman Deshmukh Memorial Lecture, Reserve Bank of India, Mumbai, 15 February Turner, A (2012) Economics after the crisis MIT press: Massachusetts Turner, A (2015) Between Debt and the Devil: money, credit, and fixing global finance Princeton University Press United Nations (2013) World Population Ageing United Nations: New York United Nations (2014) Financial Production, Flows and Stocks in the System of National Accounts United Nations: New York United Nations, Department of Economic and Social Affairs, Population Division (2013) United Nations: New York VOA – Valuation Office & Agency (2012) Business Floorspace (Experimental Statistics) Release Notes – 17 May Wellings, F (2006) British Housebuilders: History and Analysis Blackwell: Oxford WEO (2010) World Economic Outlook: Rebalancing Growth IMF: Washington, DC WEO (2014) World Economic Outlook: Legacies, Clouds, Uncertainties IMF: Washington, DC World Bank (2013) Inequality in Focus Vol 2, No 3: October Poverty Reduction and Equity Department World Bank: Washington, DC World Bank (2014) World Development Report: Risk and Opportunity – Managing Risk for Development World Bank: Washington, DC World Bank Group (2015) Global Monitoring Report 2014/2015: Ending Poverty and Sharing Prosperity World Bank: Washington, DC World Development Report (2015) Mind, Society, and Behaviour World Bank: Washington, DC World Population Ageing (2013) ST/ESA/SER.A/348 Wyatt, P (2013) Property Valuation, Second Edition Wiley Blackwell: Oxford References References and Recommendations Index affordable housing, 7, 17, 34–5, 62, 63–4, 68 Africa, 136, 138 agents, property, 38, 39, 51, 57, 59, 77, 112, 183–4, 192 Airbnb (internet firm), 75–6 Akerlof, G., 101, 201 Allen, K., 16 Alston, Professor Lee, 74 Amazon, 195 American insurance giant (AIG), 110 Archer, T., 36 Asia, 136, 138, 140, 156 asset‐backed securities (ABS), 108, 109 Association of Licensed Multiple Retailers, 197 asymmetric information, 101, 200, 201 austerity and retrenchment, 91–2, 130, 155, 159–61, 163 Australia, 4, 28, 56, 118, 136, 156 Bagehot, Walter, Lombard Street (1873), 137 balance of payments, 146, 146tab, 150–1, 183, 184–6 Bank for International Settlements (BIS), 95, 107, 113, 118 banking sector balance sheets, 5, 92, 105, 109–10, 124–5, 125fig bank runs and bank failures, 23, 102, 103, 104, 137, 138 complexity of, 85, 86–7, 99–100 creation of money by, 99, 103–7 deposit insurance/emergency funding, 103 fragility of, 102, 103, 138 government bail‐outs, 23, 31, 139, 154 ‘investment’ and ‘retail’ arms, 86–7 multiplier effect on loans, 103 and property risk, viii, 3–4, 23, 24, 31, 135 reserve assets at central bank, 124 traditional model, 102–3, 110, 124 see also financial sector Bank of England base (repo) rate, 114–15, 117, 133, 148 data and research from, 92, 93, 97, 103, 116 and ‘data uncertainty’, 190 forward guidance, 123 funding for lending scheme, 117–18 governance and accountability, 117 and Great Recession, 23, 102–3, 114–15 and high‐frequency trading, 141 as ‘lender of last resort’, 138 macroeconomic modelling by, 87, 116 macroprudential policies, 121, 122 nationalisation of (1946), 138 policy committees, 114, 116, 122, 123, 123fig, 175, 179, 192–3, 200 pre‐crisis warnings by, 23 and property markets, 69, 192–3 stress tests, 119 Barclays, 119 Barker Review of Housing Supply, 68 Barratt Developments, 36, 67 Basle committee on banking supervision, 120 New Economic Thinking and Real Estate, First Edition Danny Myers © 2016 John Wiley & Sons, Ltd Published 2016 by John Wiley & Sons, Ltd www.ebook3000.com behavioural economics, 27–8, 76, 80, 97, 137, 162 modes of thought, 27–8, 80–1, 80tab Behaviour Insights Team (Nudge unit), 28 Belgium, 77 Bellway, 36, 67 Berkeley Group Holdings, 36, 67 Berners‐Lee, Sir Tim, 194 Bill, P., 22 Birmingham, 156 Bishop, M., 79 22 Bishopsgate (Pinnacle or Helter‐Skelter) project, 38–9, 66 Blinder, Alan, 133 BNP Paribas, 100 Bovis, 67 Brazil, 155, 201 British Council for Offices (BCO), 196 British Land, 111 British Property Federation (BPF), 183 ‘bubbles’, economic, 3–4, 5, 5fig, 56, 58, 90, 130, 136–7, 139 Buffet, Warren, 108 Building Cost and Information Service (BCIS), 179 Callcutt, J., 17, 69 Canada, 56, 69, 118, 156, 187 capital capital expenditure (capex), 20–1, 37, 95, 154–5 capital requirements, 120 cross‐border flows, 140, 151, 185 Thomas Piketty on, 20, 31 traditional definition of (manufactured resources), 16, 18–19, 24, 39, 40, 85, 86 as ‘wealth’, 20, 24, 31, 88, 111, 112, 119 yield and opportunity cost, 34, 37–8, 57 Carney, Mark, 69 Carroll, Lewis, Alice in Wonderland, 103 CBRE (CB Richard Ellis), 38, 38tab, 39, 77, 112, 192 Cecchetti, S., 95, 96 central banks and banks’ creation of money, 106–7 data from, 92, 93, 95, 97, 103, 116 and Great Recession (2008–14), 21, 23, 56, 100, 102–3, 114–24, 153–4 increased role since crisis, 101, 136–7, 138, 200 and LTV ratios/LTI caps, 56, 120–2, 193 macroeconomic modelling by, 87, 116 223 macroprudential policies, 120–2, 121fig and neoclassical economics, 25, 87 role and functions of, 27, 56, 93, 113–24, 137–8, 174, 200 stress tests, 119–20 use of interest rates, 21, 56, 106, 113–17, 119, 133, 136, 137, 148, 149, 154, 175 see also Bank of England centrally planned systems, 7, 63 China, 16, 56, 63, 117, 118, 147, 153, 156 and London property market, 60, 112 per capita income in, 170, 171 Citigroup, 100 classic economists, 15, 19, 30, 49, 52, 77, 198 Coase, Professor Ronald, 26, 94–5 Cole, I., 36 Collateralised Debt Obligations (CDOs), 108, 109 commercial property advertising of, 22 business rates, 70–1, 77 confidentiality and secrecy, 192 decline of pubs, 196–8 demand factors, 64–5, 65tab, 165 demand model (demand function), 65 developers’ profit levels, 34, 36–8 development process, 38–40, 40fig factors affecting supply, 66–7, 70–2 and inflation, 193 institutional ownership, 57, 193 international transactions, 183 investment in, 2, 3–4, 8, 20, 37–8, 116 and new economy, 71–2, 194, 195–6 pre‐crisis debt levels, 3–4, 23 ‘pre‐let’ or ‘bespoke’ for sale or rent, 40, 67, 112 prime yield, 38, 38tab rental values, 33, 57 sale and leaseback, 111–12 standard commercial lease, 75 supply (stock) of, 69–72, 70tab timing of projects, 38–40, 40fig, 41, 66 valuation, 2, 58, 59 Conservation Areas, 77 construction industry, 7, 42, 50–1, 67, 129 and circle of blame, 45, 46fig data/trends, 6–7, 6fig, 183, 184 history of, 68 international transactions, 183, 184 and seasonality, 167 Construction Industry Council, 36 consumer price index (CPI), 148, 175–8 Index Index 224 Index Index CORE (Curriculum Open‐access Resources in Economics), 44 corruption, 152–3, 185 CoStar, 192 Costa Rica, 155 council tax, 77, 156–8, 157tab Coyle, Professor Diane, viii, 44 credit and appraisals, 44 bank creation of, 99, 103–7 ‘borrowing is bad’ myth, 130 ‘credit bubble’, 3–4, 5, 136–7, 139 ‘credit crunch’ term, 114–15 ‘debt‐loadedness’, 91 modern flow of funds model, 8, 88–90, 88fig, 91, 93–5, 97–8 and risk levels, 100, 101, 102 see also debt Credit Default Swaps, 109–10 Crest Nicholson, 35, 67 Cushman & Wakefield, 112, 192 Cyprus, 150 Czechoslovakia, 63 data, economic Balance of Payments (Pink book), 183, 185 and business fluctuations, 186–9, 186fig, 187tab different sources/sets of, 8–9, 165, 166, 191 empirical‐based studies, 95–6, 116, 134–6 estimates and revisions, 167–8, 170, 185–6 house price indices, 5–6, 5fig, 56, 178–9 on income distribution, 172–4, 172fig on inflation, 174–9, 175tab, 176fig international comparisons, 169, 171tab, 181–2, 181tab on international transactions, 183–6 leading and lagging indicators, 189, 192, 193 measuring of growth, 168–9 per capita measurement, 47, 170–2 real values, 169 seasonal adjustments, 167 statistical conventions and devices, 166–7 UK National Accounts (The Blue Book), 167, 168 on unemployment, 149, 150, 166–7, 179–82, 180tab, 181tab World Development Indicators, 171, 171tab Deaton, Angus, 200–1 Debenhams, 111, 195 debt absence of in conventional models, 8, 85, 87, 88, 99, 110 affects on growth, 95–6, 97 amplification mechanisms, 97 and banks’ creation of money, 104–7, 106fig and budget surplus policy, 94, 159 contagion notion, 105, 108, 109–10, 125, 138–9 and deflation, 148 and demand, 44, 97 Greek crisis, 92, 97–8, 113, 153, 185 lily and the pond analogy, 90–1 macroeconomic data on, 107, 139 and Minsky hypothesis, 131–3, 139 monitoring levels of, 139 ‘mortgage prisoners’, 91, 116 negative equity, 5, 56, 193 packaging of, 90, 108, 109, 110, 126 public sector, 27, 95, 136, 153, 154–5 rise in post‐crisis years, 58, 118, 118tab, 129–30 rise in pre‐crisis years, 23, 85, 91, 118, 118tab, 132 ‘rule of seventy’, 90–1 subprime, 4, 31, 105 and time period, 125–6 see also credit deficit, national, 1, 27, 130, 154, 155, 159 deflation, 116, 119, 146, 148, 174, 175 demand derived demand, 65, 71 effective demand concept, 60–1 factors affecting, 16–17, 41–2, 44, 53–4, 61–6, 97, 113–14, 146, 165 for government property, 65–6 and Great Recession (2008–14), 21, 71, 92, 114, 146, 148 and interest rates, 113, 114, 146, 148, 154, 175 and Keynes’s model, 26, 160 and new economy, 16, 18, 196 and property market, 6–7, 16–17, 50, 61–6, 63–6tabs, 71, 73, 75–6, 81, 146, 165, 179, 196 supply and demand graphs, 52–6, 52–3figs, 55fig, 61 demographic issues ageing population, 59, 97, 161–4 decrease in average household size, 63 overpopulation, 14 www.ebook3000.com Department for Communities and Local Government (DCLG), 157, 163, 178 Deutsche Bank, 100 digital revolution, 16, 18, 30, 51–2, 71–2, 75–6, 102, 140–1, 176, 194–6 Dorling, Danny, 59 dotcom bubble, DTZ, 192 Earth Summit (Johannesburg, 2002), 78 Easterlin, R., 47 econometric (mathematical) approaches, viii, 13, 29, 134, 189–90 economic models absence of financial sector, viii, 8, 13, 85–8, 99, 110, 122, 130–1, 133, 134, 139 circular flow model, 86, 86fig, 87–8, 87fig, 89, 93–5, 133 continuing importance of, 29, 59–60, 79–80 empirical alternatives, 134–6, 137, 200–1 institutional model, 74–5 limitations of, viii, 13, 26, 75, 87, 94–5, 110, 122, 134, 137, 139, 140, 142, 190–1 modern banking model, 103–7 modern flow of funds model, 8, 88–90, 88fig, 91, 93–5, 97–8 neo‐classical belief in, 26 and property markets, 64, 65, 74–81 quantitative and mathematical approaches, viii, 13, 29, 134, 189–90 traditional banking model, 102–3 see also forecasting, economic; free market model; Keynesian model economics as ‘bright science’, 198 definitions of, 14–15, 46–7 and the greater good, 14–15 history of economic thought, 25–9 mainstream curriculum, viii, 2, 8, 20, 44, 47, 85, 86–7, 99, 201 markets as amoral, 44–5 neoclassical dominance, 25–6 real‐world contexts, viii, 8, 13, 44, 88–93, 95–6, 97, 123–4, 131, 164, 201 Robert Lucas on, 13 as a social science, 1, 14, 25 see also free market model; macroeconomic system; neo‐classical economics; price (market) mechanism The Economist, 35, 95, 116, 122, 141 house price indicators, 56 225 education, 44, 59, 71, 126, 152, 153, 155, 156, 170, 191 efficient market hypothesis, 13, 15, 79, 200 emerging economies, 21, 138, 140 employment see labour market energy efficiency and sustainability, 14, 35, 41–2, 77–9 and circle of blame, 45, 46fig and market valuation, 45 entrepreneurial ability, 17–18, 39–40 Estates Gazette, 22, 23, 24, 192 Europe, 62, 63, 72, 128–9 European Central Bank (ECB), 87, 92, 97, 113, 114, 115, 122, 148, 151 European Commission, 95, 141 European Systemic Risk Board (ESRB), 122 European Union (EU), 2tab, 3, 153, 177, 181–2, 188 Eurozone, 21, 92, 97–8, 127, 149 bank debt and savings, 105, 106fig and external balance, 150–1, 185 monetary policy in, 113, 151 stress tests in, 119 see also entries for individual nations Evans, A., 17 exchange rates, 137, 140, 151 external balance, 150–1, 184–5 Federal Bureau of Investigation (FBI), 141 Federal Reserve, 87, 92, 95, 114, 115, 122 Federation of Licensed Victuallers Associations (FLVA), 197 financial crisis (2008) causes of, 3–5, 23, 31, 85, 86–7, 90–1, 100, 105, 110, 130–3, 154 and ‘credit bubble’, 3–4, 5, 136–7, 139 and crisis in economics, viii, 8, 13, 25–6, 44–7, 93, 94–5, 134, 199 impact on wealth and income, 20, 134 investment decline following, 116 and Lehman Brothers collapse, 2, 13, 71, 98, 102, 109–10, 138, 164 and the ‘Minsky moment’, 131, 139 property price bubble, 4, 5, 5fig, 56, 58, 90, 130 scale of debt in relation to GDP, 85, 91–2, 105, 135, 136 as unforeseen, viii, 1, 4, 5, 23, 85, 122, 134, 142 unheeded warnings before, 23, 85 see also Great Recession (2008–14) Index Index 226 Index Index Financial Crisis Inquiry Commission (FCIC), USA, financial derivatives, 31, 47, 107–8, 118, 185 and 2008 crash, 109–10 market and notional values, 107 types of, 108–9 financial instruments, 23, 86–7, 89, 99–100, 105, 107–10, 185 financialisation, 96 financial sector absence from neo‐classical models, viii, 8, 13, 85–8, 99, 110, 122, 130–1, 133, 134, 139 bonus and remuneration systems, 23, 96, 101 deregulation from 1980s, 31, 74–5 as endogenous variable, 130–1 ‘finance through money creation’, 99, 103–7 high‐frequency and high‐speed trading, 140–1 institutions and instruments, 110, 111tab, 139 liberalisation from 1980s (‘Big Bang’), 139 modern model of, 103–7 and moral hazard, 99–100, 101, 132–3, 139 new networks since 1980s, 99 post‐crash regulation, 101, 110, 113, 120–2, 161 ‘real assets’ and ‘financial assets, 88, 89 and real economy, viii, 8, 85, 86, 88–93, 95–6, 97, 131 scale and complexity, viii, 85, 99 size of, 92, 96, 99–100, 137 systemic risks across, 121fig, 138–9 underpinned by government assurance, 100, 139 workforce, 23, 96, 100, 101 see also banking sector Financial Services Authority, 96, 164, 199 Financial Stability Oversight Council (FSOC), 122 Finland, 62, 173 Fiscal Charter, UK, 94 fiscal policy, 146, 151–2, 154–9, 154fig, 174, 200 anti‐austerity arguments, 159–61 austerity and retrenchment, 91–2, 130, 155, 159–61, 163 fiscal rules, 76–7 Ha‐Joon Chang’s analysis, 159–60 forecasting, economic, 8–9, 13, 189–91 and ‘data uncertainty’, 190 law of changing conditions, 191 problems of, 141–2, 190–1 and property market, 6, 191–4 Treasury forecasts, 189–90, 190tab use of qualitative information, 193–4 France, 56, 60, 136, 148, 150–1, 155–6, 159, 169 free market model critics of, 44–5, 60, 164, 199 extension into inappropriate spheres, 44–5 ‘freedom of choice’ mantra, 50 as idealised notion, 7, 25, 50, 75 as important reference point, 60, 75, 79–80 laissez‐faire approach, 49–50 market failure, 76–7 and social housing, 63 see also price (market) mechanism Friedman, Benjamin, Garicano, Professor Luis, 134 Geithner, Tim, 92 George, Henry, 77 Germany, 150–1, 155, 181–2, 187 Gini coefficients, 173 Godley, Wynne, 89 Goldman Sachs, 23, 99–100 government property, 65–6, 66tab, 69, 72 Great Depression (1930s), 3, 26, 129, 138, 186 Great Moderation, 3, 145 Great Recession (2008–14) academic responses to, 1–2, 8, 60, 79, 80, 133, 134–7, 145–6, 159, 199 and acceptable rate of profit, 35–6 and austerity policies, 91–2, 130, 155, 159–61, 163 and central banks’ performance, 116–17 decline in productivity/income during, 19, 129, 174, 197 deficit as result not cause, 154 and demand, 21, 71, 92, 114, 146, 148 ethical and political questions, 1, 15, 60–1, 78–9, 100, 132–3, 151–2 in Eurozone, 3, 127, 148, 151, 181, 188 GDP during, 2tab, 3, 169, 170, 187–8, 188fig Ha‐Joon Chang’s analysis, 159 and housing, 5–7, 20, 36, 50, 56, 58 and inequality, 31, 174 Joseph Stiglitz on, 133 www.ebook3000.com and labour market, 15, 19, 134, 136, 149–50, 153, 156, 159, 160, 169, 182 and new economy, 194 slow recovery, 3, 4, 25, 97, 127, 128, 129, 147, 187–8 tender prices during, 179 see also financial crisis (2008) Greece, 112, 150, 151, 169, 173 corruption in, 153, 185 debt crisis in, 92, 97–8, 113, 153, 185 house prices, 56 recession in, 3, 127, 148, 181, 188 ‘Green Belt’, 17 Green, M., 79 Grimley, Bill, 195–6 Gross Domestic Product (GDP), 47, 86, 159, 168–9, 171tab, 173–4, 187–8 definitions of, 47, 147, 168 Gross National Income (GNI), 168–9, 170–1, 171tab growth, economic and debt, 88, 95–6, 97, 136 ethical and political questions, 15, 20, 29–31, 151, 164, 171–2, 173–4 and financial sector, 8, 88, 95–6, 97, 129, 131, 133, 136 and Great Recession, 1, 19, 21, 97, 116–17, 128, 146, 160, 169, 187–8, 188fig and inequality, 20, 29–31, 151, 171–2, 173–4 and inflation, 148 long‐term trend, 128fig, 129 macroeconomic targets, 146, 147, 191 measuring of, 47, 147, 167, 168–9, 170–2 per capita measurement of, 47, 170–2 pre‐crisis levels of, 3, 145, 169, 186–7 secular stagnation, 129, 146 Ha‐Joon Chang, 7, 49, 60, 99, 159, 200 Haldane, Andrew, 93, 102–3, 122, 200 Halifax price index, 5–6, 5fig, 178 Hansen, Alvin, 146 Harford, Tim, 136 Harman, J., 35 healthcare, 19, 44, 59, 71, 152, 153, 155, 161, 162–3, 170 hedge funds, 85, 100, 111 ‘Help to Buy’ scheme, 62 Herndon, Thomas, 136 Hill, S., 79 homelessness, 60–1 Hometrack website, 178 227 Hong Kong, 33, 56 hot‐desking, 71, 196 house prices, 17, 61–4, 68, 73, 80, 81, 158 assessing sustainability of, 56 and history of crises, 136 impact of crisis on, 5–7, 20, 50, 56, 58 indices, 5–6, 5fig, 56, 178–9 and interest rates, 5–6, 44, 114 and market distortions, 36 rises in pre‐crisis period, 4, 90, 132, 192 as ‘sticky downwards’, housing affordable, 7, 17, 34–5, 62, 63–4, 68 and ageing population, 163, 164 big business players, 35, 36–7 bought as asset not dwelling, 60–1 buy‐to‐let portfolios, 71 construction data/trends, 6–7, 6fig CPIH inflation measure, 177–8 demand model (demand function), 64 developers’ profit levels, 34, 35–6, 36tab empty homes, 60 factors affecting demand, 61–4 factors affecting supply, 66–70 four sectors of market, 61–2 and Great Recession (2008–14), 5–7, 20, 36, 50, 56, 58 and inflation, 192–3 loan‐to‐value ratios, 56, 120–2 off‐plan sales, 112 speculatively developed, 40, 67 transaction costs, 51–2, 51tab, 62 UK housing starts, 6–7, 6fig housing associations, 63 HSBC, 100, 111–12, 119 human resources, 17–18 income (flow concept), 19, 20, 151 income distribution, 15, 18, 19, 20, 29–30, 31, 151–2 and GDP, 47, 173–4 measuring of, 172–4, 172fig and spending levels, 173–4 India, 156, 170, 171 inequality, 1, 19–20, 29–31, 49, 151–2, 172–4, 172fig, 200 Angus Deaton’s work on, 200–1 Danny Dorling’s view on, 59 and digital revolution, 18, 30, 194 and GDP, 47, 173–4 and Great Recession, 174 and size of banking sector, 96 Index Index 228 Index Index inflation, 145, 146, 147–8, 169, 174–5, 175tab cost of living indices, 148, 175–9, 176fig CPIH measure, 177–8 and property prices, 192–3 inflation targets, 148, 174 information and communication technology (ICT), 16, 18, 30, 51–2, 71–2, 75–6, 102, 140–1, 176, 194–6 infrastructure, 32, 33, 59, 65, 160 Institute for New Economic Thinking, 164, 199–200 Institute of Economic Affairs, 197 interest rates, 115fig central banks’ use of, 21, 56, 106, 113–14, 115–16, 117, 119, 136, 137, 149, 154, 175 and deflation, 148 and demand, 113, 114, 146, 148, 154, 175 following crisis, 1, 56, 91, 114–16, 136–7, 146 and house prices, 5–6, 44, 114 and interbank market, 114 and traditional banking sector, 102 widening of spreads, 115 International Financial Stability Board, 164 International Labour Organisation (ILO), 149, 180–2 International Monetary Fund (IMF), 95, 96, 97, 118, 121–2, 152, 160–1 World Economic Outlook, 27, 160 International Swaps and Derivatives Association (ISDA), 107 investment, 8, 37, 89, 90, 116 economic definition of, 20–1 Investment Property Databank (IPD), 178, 192 Ireland, 4, 56, 62, 96, 150, 171 Israel, 173 Italy, 3, 27, 56, 92, 113, 148, 150, 153, 169, 188 Jackson Hole symposiums, 95, 149 Jakab, Z., 103, 105 Japan, 56, 117, 147, 155 JLL (Jones Lang LaSalle), 77, 192, 195 John Lewis, 195 Kahneman, Daniel, 27, 80 Kaletsky, Anatole, 15, 140, 200 Keen, Andrew, 194–5 Keen, Professor Steve, 88, 90 Kennedy, C., 34 Kennedy, John F, 15 Keynesian model, 28, 159–60 ‘fallacy of composition’, 26, 130 ‘the paradox of thrift’, 26–7 Keynes, John Maynard, 26, 199 Kharroubi, E., 95, 96 King, Mervyn, 123 Kings College Cambridge, 199–200 Knight Frank, 183 Kosovo, 155 Krugman, Paul, 102, 201 Kumof, M., 103, 105 labour (factor of production), 15–16, 17–18, 19, 24, 39, 40, 50, 76, 85, 86, 150 labour market, 180tab, 181tab and business fluctuations, 186–7, 189 Claimant Count, 180, 182 data on unemployment, 149, 150, 166–7, 168, 179–82, 180tab, 181tab distortions in, 76, 150 the economically inactive, 180, 182 financial sector workforce, 23, 96, 100, 101 full employment measure, 148–50 and Great Recession, 15, 19, 134, 136, 149–50, 153, 156, 159, 160, 169, 182 human cost of unemployment, 149 and inflation, 148 Labour Force Survey (LFS), 149, 180–2 low‐pay sectors, 18, 30, 149, 182, 191 and macroeconomic policies, 137, 146, 159, 160 measures of unemployment, 149, 150, 166–7, 168, 179–82 and new economy, 18, 30, 194 and seasonality, 167 skilled and less skilled divide, 18, 30 structural unemployment, 149–50 and training, 17 Lamont, Norman, 190 Lanchester, John, 26, 57 Land Registry, 52, 178, 183 land resources, 15, 16–17, 37–8, 59–60 fixed supply of, 14, 16, 17 Gross Development Value, 42, 43 land banks of Big Five, 36 land use regulations, 76–7 residual land value, 42–3 Latin America, 136 Layard, Richard, 46, 47 Lehman Brothers collapse (2008), 2, 13, 71, 98, 102, 109–10, 138, 164 Lewis, Michael, Flashboys (2014), 140–1 www.ebook3000.com Liberia, 155 LIBOR (London Inter‐Bank Offered Rate), 114 listed buildings, 77 Lloyds, 119 loan‐to‐value (LTV) ratios, 56, 120–2, 193 local government, 17, 70, 155–8, 159, 161, 163 London property market, 16, 60, 69, 112, 183–4 London School of Economics (LSE), 46, 134 Lorenz curve, 172–3, 172fig Lorenz, D., 78, 79 Lo, Stephanie, 96 Lucas, Professor Robert, 13 Lunn, P., 28 Lützkendorf, T., 78 macroeconomic system and business fluctuations, 128–9, 128fig, 131, 186–9, 186fig, 187tab circular flow model, 86, 86fig, 87–8, 87fig, 89, 93–5, 133 data, 2, 107, 165–6, 201 see also data, economic; forecasting, economic and equilibrium, 94–6, 98, 200 four sectors of, 93–4 and Keynesian model, 26–7, 130, 186 macroeconomic targets, 146–52, 146tab, 161, 166 modelling by central banks, 87, 116 modern flow of funds model, 8, 88–90, 88fig, 91, 93–5, 97–8 see also banking sector; central banks; credit; debt; financial sector; public finance macroprudential policies, 120–2, 121fig Maine Tower, London Docklands, 112 Malaysia, 60, 118, 155 Manchester University, 201 Mankiw, G., manufactured resources (capital), 16, 18–19, 24, 39, 40, 85, 86 manufacturing sector, 33, 50, 150 marketing strategy, 28 Marshall, Alfred, Principles of Economics (1890), 49, 52–3 Marshall, P., 34 Marx, Karl, 30 McKinsey Global Institute, 91–2, 118 McPartland, Kevin, 140 microeconomic principles, 7, 75 microprudential policies, 120–2 Mihm, S., 110, 134 229 Milanovic, B., 30 Miliband, Ed, 172 Minsky, Professor Herman, 131–3, 139 Molior, 183–4 Monbiot, George, 79, 152 monetary policy, 110, 111tab, 113, 136–7, 139, 200 conventional approach (before 2008), 113–15, 137 in Eurozone, 113, 151 unconventional approach (since 2008), 115–24, 137 mortgage‐backed securities (MBS), 4, 5, 24, 85, 108 Commercial Mortgage Backed Securities (CMBS), 108, 109 Residential Mortgage Backed Securities (RMBS), 108–9 mortgages, 5–6, 135 deposit levels, 56, 62–3, 81 endowment, 132 interest tax relief, 62 irresponsible lending, 132–3 LTI targets, 121, 122 LTV ratios, 56, 120–2, 193 and Minsky hypothesis, 132–3 National Accounting process, 93, 97, 167–70, 188–9 National Home Building Council (NHBC), 67 Nationwide building society, 119, 178 natural resources, 16 negative equity, 5, 56, 193 neo‐classical economics belief in modelling, 26, 87 as ‘blackboard economics’, 94–5 and budget surplus policy, 159 ceteris paribus assumption, 53–4, 61, 73 circular flow model, 86, 86fig, 87–8, 87fig, 89, 93–5, 133 as ‘dismal science’, 198 financial sector as absent, viii, 8, 13, 85–8, 99, 110, 122, 130–1, 133, 134, 139 and inequality, 19, 29, 30 notion of stable equilibrium, 8, 27, 55, 55fig, 56–7, 79–80, 94–5, 98, 134, 200, 201 and perfect information, 79, 101 and post‐crisis world, 8, 25, 26, 27, 79, 86–7, 101, 133, 142, 148, 150 pre‐crisis dominance, 25–6, 50, 101, 133, 134, 201 Index Index 230 Index Index neo‐classical economics (cont’d ) ‘rational economic being’ concept, 15, 25–6, 27, 28, 80–1, 100, 200, 201 view of production, 15–21, 26, 29, 30, 60, 150, 152 see also free market model; price (market) mechanism Netherlands, 3, 4, 56, 150–1, 171, 188 Newcastle, 156 new economy, 16, 18, 30, 51–2, 71–2, 75–6, 102, 140–1, 176, 194–6 New York, 16, 65, 71, 75–6, 92, 140 New Zealand, 136, 156, 162, 173 Nordhaus, W.D., Nordic states and Scandinavia, 56, 60, 62, 118, 163, 169, 171, 173 Northern Rock crisis (2007), 23, 130 Norway, 169, 171 OECD (Organisation for Economic Co‐operation and Development), 28, 72, 95, 96, 173, 188–9 wellbeing project, 47–8 Office for National Statistics (ONS), 67, 161, 165, 167, 176–7 opportunity cost, 14, 21, 33, 34, 42 Orlowski, L.J., 141 Osborne, George, 94, 190–1 Overend & Gurney crisis (1866), 137, 138 overseas sector, 86, 93–4, 112, 183–6 owner‐occupied sector, 40, 61, 62, 62tab, 63 Oxfam, 30 Pakistan, 155 Pareto, Vilfredo, 42 Paulson, Hank, 23 payday loans, 110 pension funds, 38, 85, 89, 100, 108, 110, 117, 124, 141, 193 pensions, retirement, 152, 153, 155, 161, 162, 164, 180 Persimmon, 35, 36, 67 Peterson, Warren, 193–4 PFI schemes, 155 Piketty, Thomas, Capital in the Twenty‐First Century (2014), 20, 31 planning legislation/policy, 8, 17, 34–5, 57, 59, 67, 76–7 Poland, 63 Ponzi, Carlo, 131 Portugal, 3, 113, 148, 150, 169, 188 Positive Money (pressure group), 104 Post‐Crash Economics Society (PCES), 201 poverty, 29–30, 60–1, 152, 171–2 price (market) mechanism and asymmetry concept, 101, 200, 201 ceteris paribus assumption, 53–4, 61, 73 commodification of everything, 44–5 and construction industry, 50–1 efficient market hypothesis, 13, 15, 79, 200 Ha‐Joon Chang on, 60 and income distribution, 19, 29, 30 and incomplete information, 13–14 and individual ‘self‐interest’, 50 markets as amoral, 44 and Marshall, Alfred, 52 notion of stable equilibrium, 8, 27, 55, 55fig, 56–7, 79–80, 94–5, 98, 134, 200, 201 notion of unstable equilibrium, 55–6, 75 Pareto’s view of, 42 and property/land resources, 16–17, 37–8, 42, 44, 50–2, 54–60 and rational economic beings, 15, 25–6, 27, 28, 80–1, 100, 200, 201 and Smith, Adam, 49–50, 52 social and political controls, 7, 15 supply and demand graphs, 52–6, 52–3figs, 55fig, 61 and time period, 53 unethical markets, 77–8 see also neo‐classical economics Private Eye, 152 private rented sector, 61, 62–3, 63tab profit acceptable rate of, 33, 35–6 ‘actual’ profits, 34 alternative measures of success, 45–7 cost and price, 42–3 future rates of return, 34, 36–7 margin over volume strategy, 36 normal profit concept, 33, 41 and opportunity cost, 33 pre‐recession volatility, 36tab prime yield, 38, 38tab and property development, 32, 33, 34, 35–7, 36tab, 40–1, 69 residential and commercial comparisons, 34 and social housing, 34–5 ‘total return’ or ‘overall return’, 37–8 yields, 32, 37–8, 38tab Prologis, 195 property markets as complex and diverse, 24, 32, 57–9, 69, 70 confidentiality and secrecy, 58, 192 www.ebook3000.com and demand, 6–7, 16–17, 50, 61–6, 63–6tabs, 71, 73, 75–6, 81, 146, 165, 179, 196 development process, 39–40, 40fig and equilibrium price concept, 54–6, 55fig forecasting, 6, 191–4 framework for development appraisal, 43 and illiquidity, 24, 58, 59 importance of in real economy, viii–ix, 2–3, 146 inelastic supply relative to demand, 73, 74fig, 81 and inequality, 152 and inflation, 192–3 investment drivers, 116 investor‐developer and trader‐developer, 21 local, 22, 51, 59, 69, 75, 165 multiple markets, 57 neglected by mainstream texts, viii, 2, 17, 20 ‘net’ and ‘replacement’ investment, 21 net present value (NPV) concept, 126 price ‘bubble’ (1986–89), 5, 5fig price ‘bubble’ (2000–07), 3–4, 5, 5fig, 56, 58, 90, 130 pricing of property‐related assets, 33 quality and size of built structures, 17 social and political controls, 7, 34–5, 76–7 specialised funding options, 111–13 supply as relatively fixed, 66, 73, 74fig, 81 taxation on, 156–8 and time period, 57–8 see also commercial property; housing; mortgage‐backed securities (MBS); mortgages public finance, 154–64 and behavioural economics, 28, 81, 97, 137 capital expenditure rule, 154–5 central‐local government tension, 155–6 and devolved federal structures, 155–6, 158–9 and emergency funding for banks, 103 golden rule, 155 in Greece, 153, 185 Keynesian model, 26, 27, 160 and private debt, 97 problems of forecasting, 190–1 public sector debt, 27, 95, 105, 127, 136, 153, 154–5, 159 public services, 15, 59, 65–6, 151–2, 162–3 sale of government property, 72 stabilisation policy, 94, 113–24, 153–4 231 sustainable investment rule, 155 see also central banks; fiscal policy; monetary policy public houses (pubs), 196–8 public spaces, 32, 33 quantitative easing (QE), 117–18, 119, 148, 154 Rajan, Professor Raguhuram, 31 recessions definitions of, 127, 128–9, 128fig, 169 history of, 127, 134–6, 137–8, 187 types of recovery, 129 see also Great Recession (2008–14) Redrow, 67 Reed Elsevier group, 22 regulatory systems, 28, 76–7, 92, 100, 101, 110, 139, 141, 142, 161, 192 since 2008 crisis, 101, 110, 113, 120–2, 161 Reinhart, C.M., 134, 135–6 Resolution Foundation, 91, 116 resources (factors of production), 7, 15–19, 86, 151 and alternative uses, 14, 16–17, 33 and scarcity, 14 social and political controls, 7, 14–15, 19, 34–5, 151–2 status of financial capital, 24–5 Ricardo, David, 15, 30, 77 Rightmove website, 178 ‘right to contest’ scheme, 72 Robbins, Lionel, An Essay on the Nature and Significance of Economic Science (1932), 14, 46–7 Rogoff, K.S., 96, 134, 135–6 Roubini, N., 110, 134 Royal Bank of Scotland, 119 Royal Institution of Chartered Surveyors (RICS), 1, 14, 45, 59, 78, 179 Russia, 63 Samuelson, Paul, 2, 19 Sandel, M.J., 44–5 San Francisco, 76 Santander UK, 119 Savills, 183, 192 saving, 26–7, 105, 106fig Scandinavia and Nordic states, 56, 60, 62, 118, 163, 169, 171, 173 scarcity, 14, 24 Schiller, Robert, 142, 200 Index Index 232 Index Index secular stagnation, 129, 146 securitisation see financial derivatives September 2001 terrorist attacks, 65 shadow banking system, 23, 89, 100, 107, 110, 111tab, 118, 119 Shapps, G., 17 Shell, 111 Skidelsky, Professor R., 22 Smith, Adam, 30, 49, 52 Smith, Greg, 99 smoking ban, 197 social and environmental returns, 14–15, 34–5, 45, 77–9 direct and indirect costs/benefits (externalities), 41–2 social housing, 34–5, 77 demand factors, 64tab local authority rented sector, 34–5, 61, 63–4, 152 origins of, 63 registered social landlord sector, 61, 63–4 sale of council houses, 63, 152 Solow, Robert, 100 South Korea, 56, 118 South Sea bubble (1720), Spain, 3, 56, 60, 62, 92, 113, 127, 148, 150, 169, 188 stamp duty land tax (SDLT), 59, 77, 81, 156, 157tab, 158, 178 Standard Chartered, 119 state and corruption, 152–3 debates on size of, 15 and devolved federal structures, 155–6, 158–9 household comparison, 130 laissez‐faire approach, 49–50 public services, 15, 59, 65–6, 151–2, 162–3 role of, 7, 49–50, 152 see also central banks; fiscal policy; monetary policy; public finance Stiglitz, Professor Joseph, 108, 133, 174, 200, 201 stock markets, 58, 134, 140–1 St Paul’s Cathedral, London, 77 structured financial assets see financial derivatives Strutt & Parker, 192 student loans, 109, 126, 139 supply benchmarks and targets, 68–9 factors affecting, 53–4, 66–72 housing stock, 66, 67–70, 68fig, 73, 81 institutional model, 74–5 law of, 67 ‘new build’ market, 66, 67, 68–9, 68fig non‐price determinants, 73–5 and price signals, 50 property stock as relatively fixed, 66, 73, 74fig, 81 and specific markets, 75–6 supply and demand graphs, 52–6, 52–3figs, 55fig, 61 surveying profession, 2–3, 8, 14, 21, 32, 49, 165 appraisals, 8, 34, 40, 41, 42, 43–4, 57–8, 78, 79, 125, 126 and ethical responsibility, 78–9 professional magazines, 22, 23, 24 and valuation, 2, 22, 43–4, 58, 59, 125 Sweden, 56, 60, 118, 173 Switzerland, 171 taxation, 19, 76–7, 151, 154, 174 forms of, 156–8, 157tab offshore companies, 152, 158 on property, 156–8 Taylor Wimpey, 35, 36, 67 Thailand, 118 Thaler, Richard, Misbehaving: The Making of Behavioural Economics (2015), 137 The Economist, 35, 95, 116, 122, 141 house price indicators, 56 Transparency International, 152–3 Turkey, 173 Turner, Adair, 96, 164, 199–200 unemployment see labour market United Kingdom (UK) ageing population, 59, 161–4 Balance of Payment data, 183–5 cut in stamp duty (2014), 81 decline of pubs, 196–8 fiscal policy, 154fig, 155, 156–8, 157tab, 159 GDP/GNI, 147, 167, 168–9, 170, 171, 188fig Great Moderation in, 145, 186–7 ‘Green Belt’, 17 history of financial crises, 4, 103, 136, 137–8 income distribution, 30, 172 inflation rates, 145, 148, 174–8, 175tab length of business cycle, 187–8 macroeconomic targets, 146tab Osborne’s budget surplus policy, 94, 159 www.ebook3000.com outbreak of crisis (2007), 23–4 property market, 5fig, 6fig, 17, 22–4, 34–9, 50–2, 61–5, 119, 133, 178–9, 191–3 property market in London, 16, 60, 69, 112, 183–4 rate of recovery in, 19, 147, 167, 169, 187–8 size of financial sector, 92, 96 unemployment in, 149, 180–1, 180tab, 182 see also Bank of England United Nations (UN), 78, 162, 171, 180 United States of America (USA) and ageing population, 162, 163 bank debt and savings, 105, 106fig FCIC (Financial Crisis Inquiry Commission) report (2011), 192, 193–4 fiscal deficit, 155 Great Moderation in, 145 housing crisis (2007–8), 3, 56, 62, 105, 127, 140, 187 inequality in, 20, 173 irresponsible lending in, 133 length of business cycle, 187 National Bureau of Economic Research (NBER), 128, 129, 187 rate of recovery in, 127, 128, 169, 187 relative lack of corruption in, 153 233 as richest economy, 147, 171 Securities and Exchange Commission, 141 stress tests in, 119 unemployment in, 182 university degrees, 191 Valuation Office Agency (VOA) rating list, 70 wealth (stock concept), 19, 20 wealth distribution, 19–20, 31, 49, 59, 194 welfare, 1, 15, 19, 60, 64, 151, 154, 155, 174 and austerity policies, 159 in Greece, 153 and national accounting data, 170 need for structural reform, 163–4 and property development, 35, 42 wellbeing and happiness, measuring of, 46, 47–8, 48fig Wellings, Fred, 68 Whitbread group, 112 World Bank, 28, 29–30, 147, 171–2 World Development Report (World Bank, 2015), 28 World Economic Forum, Davos, 174 ‘zero hour contracts’, 149, 191 Index Index .. .New Economic Thinking and Real Estate www.ebook3000.com New Economic Thinking and Real Estate Danny Myers This edition first published 2016... for New Economic Thinking and Real Estate, First Edition Danny Myers © 2016 John Wiley & Sons, Ltd Published 2016 by John Wiley & Sons, Ltd Part A Chapter 1 14 New Economic Thinking and Real Estate. .. Chapter 1 Basic Economic Principles 18 New Economic Thinking and Real Estate Part A The entrepreneur is associated with the founding of new businesses, or the introduction of new products and techniques