Editorial

Article Type: Editorial From: Journal of Property Investment & Finance, Volume 30, Issue 5

As a new addition to the editorial board of this journal, I believe that all property research papers should be closer to the reality of the real property market.

Having spent most of three decades involved with property research, having previously been a Chartered Surveyor for ten years of my life, I have frequently sat at conferences listening to badly presented papers, high in numerical analysis and very low in market empathy, which leave property fund managers cold.

They frequently remind me of J.K. Galbraith’s story when he was preparing a speech for President Johnston. Lynden B. read the draft then turned to John Kenneth and said:

[…] making a speech on economics is just like pissing down your leg. It seems hot to you, but not to anybody else.

Whilst it is true to say, if the Credit Rating Agencies had complied with the rules and ethics of Chartered Surveyors and had diligently understood the income flow of the investment before providing a credit rating, the credit crunch may not have happened. It is also true that a few property researchers had no idea what caused the financial collapse.

For some years before the event I seemed out on my own trying to explain the flood of money travelling from the developing countries (especially Asia-Pacific) into developed economies of the USA and EU, and how this had contributed to the rise of Commercial Mortgaged Backed Securities. Why was I alone?

And I have continued to explain how Keynesian economics became replaced by monetary economic thinking, which was eventually the cause of the chaos we have today. J.K. Galbraith, Joseph Stiglitz and others warned of the errors of the“Washington Consensus” long before the crash.

More recently I have tried to explain, in a paper jointly authored to the Investment Property Forum, which Monetary Policy focuses on demand-pull inflation, but is almost incapable of controlling cost-push or asset price inflation. Yet it is the latter which caused the property boom.

As for the Arab Spring and the impact on property markets, it is partly a consequence of rising world food prices (cost-push inflation), caused in part by climate change – floods and droughts resulting in food shortages. Economic, environmental and social issues are clearly linked and manifest in the Arab Spring.

These all require property researchers to put away spreadsheets and reflect on the market and the events impacting on property prices and investment performance. The opportunities for original research are vast and very exciting.

Angus McIntosh