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Pavletich on the Housing Bubble:

Housing: Taking A Bubble Bath To Reality
Tuesday, 30 September 2008, 10:39 am
Hugh Pavletich writes:

Unfortunately – too many within the economics, urban planning and property appraisal / valuation professions – who have been "schooled" in markets, but not actually "educated" in them with practical experience – have failed professionally - by not informing policymakers and the wider public of the real costs and consequences of housing bubbles. Indeed – many have been more than willing to act as "cheerleaders" for these bubbles.

Experienced property development practitioners ("market developers") know to exit bubble urban markets as soon as possible – because in reality with land and construction inflation, they are in real terms paying tax on illusory profits and left holding "bubble value" land and property, which will crash at some stage. So if their development businesses do not fail because of cash flow problems in attempting to debt and equity finance the inflation – the collapsing bubble values will finish them (and their financiers) off in the end.

The "market developers" are soon replaced with the brave new breed of "planner developers" – who with their bankers / financiers – appear blissfully unaware of the risks (a word recently "rediscovered"in the finance sector) of playing the "bubble game" (with the "stack up merchants" in the investment / speculation sector – who convince themselves that property will inflate indefinitely). These "planner developers" are also willing to take on additional substantial risks of capitulating to urban planners and local politicians romantic ideas (much time is spent together having "visions")–something "market developers" strenuously resist, as the latter are acutely aware of their social and commercial responsibilities (don't go broke and hurt people) and the heightened risks involved, should they capitulate.

"Market developers" view reputation as their most important "asset". The reality is that "reputation" is a far more robust consumer protection than "regulation".

Read the Entire Article at Scoop Independent News:
http://www.scoop.co.nz/stories/BU0809/S00584.htm
More by Pavletich: http://www.demographia.com/pav-performance.pdf
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