Economy, Microeconomy

Speculation or just freedom?

These days I’ve heard many things about property prices. Yes, they have been soaring in Spain. Crazyly. Each day you wake up and you are a bit richer. Everyday a bit more.

Until there will be a time when you’ll be poorer. Since Joseph and the fourteen cows (remember seven fat cows and then seven thin cows that the pharaoh dreamed of?) things go up and then down. Even when it seems that the old laws of the universe have been abolished, they are stubborn enough to come back again.

But this is not what worries me most. In fact I’ll think more about it any other day, but not today.

Today I am thinking of freedom.

Well, I’ve heard something about a new law. All laws begin with the statement of a good intention or about a political idea. This political idea is so nice: real state has a preminent purpose: to be inhabited.

This new law wants to make propietors feel more secure about lending their properties to third parties. Father State would give propietors some extra assurances: as a protection if the lender couldn’t pay the lease, or if the lender decided to make some extra arrangements and tear all the walls down.Propietors should be happy with this new security. An extra help is always welcome. People that lease properties want two things: to be paid in a timely fashion, and to have a nice tenant that gives no trouble. And if they were not happy enough they would have to face extra charges for keeping their properties empty.

Why do we always relate speculation to bad things? Which is the difference between speculation and arbitrage? speculation or investment? Using a different word doesn’t sound so bad: now we are investors, not speculators. Isn’t it right to invest your own money into property if you wish so? Shouldn’t you have the freedom to? Is investing morally objectable?

As you can guess I don’t endorse that. You should have the freedom to buy whatever you wanted and then do whatever you wish with your property -of course I’m not thinking of doing anything harmful to others, just exercising your property rights.- Even if you want to keep it empty and wait for prices to rise.

How on earth we have managed to consider the investor -ok let’s say speculators- some sort of criminal. An investor puts down his own money, and takes some risk. Lots of people and wealth are generated that wouldn’t be if that money was inside a box. What if the property prices go down? That’s a risk for the investor to take.

Governments may support the lending of property to tenants with the law. In fact they should. But they should do it to the extent of protect both parties engaged in a contract. Not to penalise empty flats subverting the market. Not to assume liabilities that belong to the tennant -in the end we tax payers assume them all- but making law faster, responsabilities clearer so if a tennant commits a crime he is adequately prosecuted, so if a tenant doesn’t pay he is adequately obstructed.

Governments may even make a difference between investors and speculators. For example, making it compulsary to keep your properties in good condition so a building next to a school doesn’t end up being a rat nest while you wait for prices to rise. But if you want to keep that building for your own use, even if it’s once a year, and you are a good neighbour, no one should stop you.

No useless remorse on investing, no freedom cuts, we just need a sleek justice that is able to make the parts fulfill the contracts, whether they like it or not. Laws that regulate better the obligations agreed between the parts and protect both of them from abuse.

That would make the lease market work better. Other measures just distort the market, leaving all of us a bit worse off, somehow.


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