Property Market
October 30, 2008 by Holst Group
Edward de Bono’s Message
When the property market is falling buyers tend to wait until it falls further. Why buy now when yhou can get a lower price in a few months’ time? So the market falls further because some people need to sell and lower their price.
We could create a new type of contract. You sell at today’s price but contract with the buyer that in a year (or two years) if the house price index has fallen by a further twelve per cent then you refund that twelve per cent to the buyer. There is now no point in waiting. So the market stops falling and you may not have to refund anything. This could be a new type of contract which anyone could be free to use.
To create a stable market why not throw away the idea of getting as much as you can and replace it with a system where all property has a set basic price which is only increased by the improvements made to it which can again be priced. For example a basic 3 bedded detached house would have a basic price of say £250,000.00. Whilst a 3 bedded semi-detached house would cost say £200,000.00 and 3 bedded terraced house say £150,000.00. These would be the basic prices for each type of property. But if you added say a conservatory, then the value of the property would be increased by an agreed percentage of the basic price. This I think would take the greed out of the housing market and put houses back into everyones reach.
I love the idea. Markets are based on competition and this cooperative strategy goes against the grain. I worry there isn’t a technical problem as most people (on the way up the property ladder) have traditionally tied up as much capital as possible in the house, not leaving much spare for refunds. If the market moves in concert then the money can come down the property chain, but only so long as it exists at the top. I’d love to see someone make it work, I think we’re all sick of markets. Wouldn’t it be great to see someone invent some cooperative money making mechanisms for the financial markets.