Real estate speculation

A real estate speculation is an operation very Profitable of purchase, or construction, a Real estate, for a low price at the “normal” price of the market. This real estate is generally resold by the owner, Property developer, Real estate agent, or Particulier, with comfortable margins.

One speaks about Real estate bubble when the whole of the prices of the Real estate market are in big rise; in general, the term of real estate speculation relates to only one restricted sector of the market (a real great project, a district, a city,…).

The real estate market is indeed segmented in multiple under-markets which have their particular characteristics, as regards elasticity of demand (i.e. number of ready agents to sell their real estate of it in the event of rise of the prices) and of elasticity of the request. More the conditions of market move away from the conditions from Pure competition and perfect, more it is probable that a real estate speculation takes place at one time or another.

A speculation is also made possible when the attribution of Government contract, the delivery of Permis to build, or the passage in constructible Terrain, is done in an opaque way and Discrétionnaire.

Context

In center of a zone, the scarcity of the residences, accompanied by a local or national demographic boom, can involve an imbalance of the economic situation (short term) or structural (permanent imbalance), and thus a speculative movement.

The speculation can occur in specific cases, inter alia: a change of zoning in sight; a property to be renovated; a sale in justice; a divorce; the installation of a Undertaken, provider of employment; …

In particular, the grounds located near an agglomeration and of its networks will see their price strongly depending on their zoning. Between an agricultural assignment or natural and that urbanisable (classification in constructible Ground), the price difference are often very high. A high density and a strong tension on the prices in the agglomeration reinforce this price difference.

Cause of disequilibriums of a market

See also: Real estate bubble

Causes structural

  • Concentration of the populations on certain gravitational zones professionally, climatically, culturally, etc
  • Rural migration (in the countries in the process of development).

Causes of the economic situation

  • Investment badly directed real estate passed, big number of empty offices.
  • unforeseen Modification of the conditions D employment (drops with Montpellier with the IBM factory shutdown in 1992, rise with Toulouse with the operational startup of the Airbus A380 in 2000).

lawful Causes

  • Bad condition of housing stock because of the taxation and the absence of protection of the small holders.
  • Political restrictive of permit building; but when well even this one would be granted in a very free way, one cannot build on the streets , and it is necessary well in sparing.
  • Bad management of the land and real inheritance of the state and not release of the land and real park become less useful.

budgetary Causes

  • Deficiency of residences subsidized (social) to support urban co-education; to organize promiscuity would prevent the price of the nonsignificant zones from flying away, since there would not remain about it any more only one.
  • Political of Urban renewal not very active.
  • Destruction of housing unhealthy without constructions of new housing.

sociological Causes

  • end of the traditional reference marks (family, welfare state) which make the individuals receptive to the stress.
  • the preceding myths (the golden delicious-servant boy of the years 1980, new economy of the years 1990) made failure and must leave room to a new myth, that of the rich person landowner.
  • rumors of shortages of housing, maintained by secondary myths:
    • the myth of massive purchases from abroad.
    • the myth of the mini baby-boom of the years 2000-2001.
    • the myth of the rise of the number of students.
    • the myth of the local market disconnected from fundamental from the market.
    • the myth of the bad maintenance of housing stock whereas France profits from the best park of Europe.

Prevention of the speculation

The speculation is not in oneself detrimental if it helps to direct the capital towards the places where exist strong real needs. However, certain causes of excess (absence of anticipation of the needs and the shortages) are to be avoided.

Only action, at least at a regional, and more widened level can ideally anticipate which will be the urban development zones, for example the 5 new cities of the Paris region of the years 1960 around a pole like a station LGV.

In addition if one makes pay during a change of zoning possible ecological degradation the problem would be almost reversed, but this solution is complex to set up, supposes objective criteria (thus nonideological) of evaluation and can block freedom of circulation.

The local construction of social housing, in addition to the traditional residences , would move away from the market the agents to the weakest incomes. Any additional contruction of housing reduces the speculation, but the replacement of traditional residences by social housing would not limit in oneself the speculation.

To impose rental ceilings maxima, these criteria being free in France, would increase the request for housing and would decrease the offer, encouraging the speculation; this method used on several occasions in the past has leads to create perverse effects (reserves of the savers to be invested in the private locative).

To cancel the limitations height of the buildings in certain zones permetterait to build higher buildings thus to build more m ² livable.

For the built buildings the obligation to respect quality standards and the transparency under all the conditions to avoid to the maximum the swindle at the expense of the end-buyer for factors which it does not perceive yet but go péjorer its pleasure.

To limit the number of empty residences (by decreasing the constraints on the owners which rent, for example).

Historical examples: Paris

With the modern time, the speculation was the engine of the urban embellishment . So the urban developments, allotments did not cost anything the State, being financed by the speculators. The town of Paris in is an example among others:
  • the Place of the Vosges, built on the ground of the gardens of the old hotel of the Small towers which belonged to the crown, It is with Maximilien de Béthune, duke of Sully, the minister of Henri IV, whom was entrusted the task to parcel out, to make it build and to resell it.
  • the Place Vendôme, built on the ground of the Vendôme hotel by Jules Hardouin-Mansart and German Boffrand and financed by a grouping of six speculators (the farmer general Alexandre Lhuilier, the treasurer of extraordinary of the wars Jean de Sauvion, the general receiver of finances Braces Fontanieu, Nicolas-Jerome Herlaut, the architect Pierre Bullet and the lawyer Mathurin Besnier). Once the built frontages, the grounds were resold with private individuals so that they build the remainder of the buildings.
  • the allotment around the Theater of Odéon on the ground of the garden of the hotel of the Prince de Condé by the architects Peyre and De Wailly.

After the Revolution of 1789, the same phenomenon continued, the French State started to coordinate the speculation, with the plan of the artists, carried out in 1795, which counts the streets authorized with the speculation, the project being sold with the ground. It started to speculate, and set up since 1810 the Expropriation due to public utility, who allows him to buy the grounds:

  • the Street of Rivoli, projected under the First Empire by the architects Percier and Fountain.
  • Under the Second Empire, the transformations of Paris are carried out as follows: the State engages of the expenses during expropriation, carries out an allotment, and resells with appreciation the pieces to be built.

More recently, the prices dropped by 40% on Paris between 1991 and 1998 in constant euros, before taking again a very strong rise (more than 100% between 1998 and 2007).

See too

Related articles

External references

; Bibliography

; External bonds

    • Private bill tending to fight against excesses of the sales by batches and the real estate speculation (Mr. Patrick Beaudouin)

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