“PRICE IS A LIAR”

Mark Yusko

I enjoy Max and Stacey making me think differently about asset markets on “The Keiser Report”.

Episode #1445, with Mark Yusko of Morgan Creek Capital, grabbed me when Yusko argued and emphasised that “Price is a liar!” We need to ignore volatility and look for fundamental value.

That’s spot on!

That applies particularly to land price! I’ve argued <– here that unimproved land will usually have a value, unless it’s located somewhere out in a desert ‘beyond the margin’, but if we were to take proper care of ourselves, a piece of land located anywhere should never have a price.

That’s right: all land prices should be zero! It’s only produced items having a cost of production that should have a price. Unimproved land has no cost of production.

Nil land price would be the position, of course, only if we were to capture the full rent of sites to the public purse, instead of taxing productivity, as we do now. Were we to take the site rent, there’d remain nothing to be capitalised into a price. Sites would still have a value reflecting their size, shape, topography and surrounding services, but they’d have no price. Simple.

With the average land price share of real estate values in Australia currently exceeding 70%, a nil land price has enormous positive implications for generating a lasting prosperity, especially as land rent can’t be passed on in prices as taxes which cascade down through every stage of production and distribution are.

Land price is a wraith habitually halving (approx) at every recession, creating financial havoc. It shouldn’t exist. Land price is a liar!