City AM - gloriously missing the point.

From page 2 of today’s paper edition:

Land and housing boom The UK’s net worth rose £492bn last year due to surge in property prices and the value of land… Almost all of the rise was fuelled by a £450bn land value rise, while housing added £40bn

The UK’s net worth clearly does not change one single penny because land values change. At best, land values are an indication that the productive economy is doing well and the country is being well run.

Firstly, the value of land fluctuates inversely to interest rates (or proportional to credit availability) so it is not real, hard capital. Do we as a nation become wealthier just because interest rates fall? I doubt it.

Secondly, land values are merely the net present value of wealth that will flow from elsewhere to today’s landowners, whether that flow is direct (rent or selling prices) or indirect (all the public services funded out of taxes on output and employment).

If you take into account the net present value of the equal and opposite flows of wealth from tenants, buyers and taxpayers, the net value of land is at best £nil, and probably a negative.