Property and the Essentials for Life

03/07/2008

Well, that was an interesting wee experiment. No fuel for the cars, the lorries and even some motos were silent. The supermarket shelves quickly emptied and some people even had to revert to drinking tap water. Throughout the business community, now priding itself by working on a 'just-in-time' basis, there will have been disruption to a greater or lesser extent. Unfortunately, looking at the causes, this is likely to become an increasingly common occurrence. Not that it will necessarily be by concerted workers action, but just that the lines of supply of everything within our consumer society are becoming stretched and frayed. As long as it continues to work, supplies will continue. However, as the process becomes more fragile, smaller and apparently less significant problems will have greater ramifications on all of us.

FFF & W - No, not an expletive, it stands for Fuel, Food and Finance -- to which I have added Water.

*Fuel, which basically means hydrocarbons of oil and gas, is in increasingly short supply, for many real and also speculative reasons, at a time when world demand is increasing hugely. As a result, the price rises and it is unlikely that we will see any significant drop or returned to the lower levels we enjoyed in the past. All businesses will have to adapt to the multiplying direct fuel costs and the significant increase that there will be in all other areas as the effects move through the economy. The effects on individuals will also put pressures on business as people will see their salaries struggling to meet their basic costs and the cost of commuting to work rising significantly. Anybody that puts a fixed amount in their fuel tank whenever they fill up will have noticed that for some reason the car is not working so efficiently as it was! For some on a lower salary this could mean that they will have to consider finding work closer to their home or alternatively move home to be closer to their work. And what of all the products that are now manufactured in China? The cost of transport will begin to have an increasing impact on the end prices of even those in the shops.

*Food, essential for us all, is supplied to us through the shops that are at the end of a long chain of supply. The probability is that there will have to be more local storage of foodstuffs and more local sourcing of supply. Subsidiary delivery warehouses may have to be obtained by the supermarkets so that they are not caught out by disruption to long-distance haulage. As food is sourced more locally, both food shops and restaurants will have to concentrate less on the exotic and more on the provision of locally grown, seasonal items. Will people be prepared to travel far to that favourite restaurant, or perhaps concentrate more on finding what is good in their own locality?

*Finance, which 'makes the world go round', is in a right mess. There is too much of it, but nobody has the confidence to spend it or lend it. The oil States must be suffocating under its weight as the price of their product is multiplied without any significant increase in the costs. Where do they reinvest it? Western capitalism is looking shaky whilst rising economies such as India and China are forming themselves in the same model. It is going to take some time and major restructuring for the financial world to regain its confidence.

*Water, which is part of food really, but concerns about it are so much more obvious to us all here. We have been saying for years, "but where is the water to come from?" This year Malaga and Barcelona have been rescued by a wet spring, but forecasters tell us that this means that the summer is likely to be hotter and drier, so we could be in for a sticky autumn. In the longer term, there will have to be more water storage in the form of reservoirs. In addition to flooding valleys, there could also be investigation of blocking water outlets from the natural caverns within the mountains around us, thus using them as storage areas. Around the world, all people are going to have look to being more economic with its use.

So this article is supposed to be about property, but property and its values results from the wider economy. As seen above, this economy is in a time of significant change. Change is the lifeblood of property as no change would mean no property transfers, little new demand creates a minimal need for new supply and thus values stagnate. Indeed, when demand is less than the supply of property, as now, values drop to try to encourage the buyers to commit themselves. Often it has the reverse effect as buyers hang on waiting for a true bargain. And these are available, though often not in the best of circumstances. I sit here with a list of literally hundreds of properties that have been repossessed or handed back to banks and which are now being offered for no more than they cost of the loan that is outstanding. The personal tales of struggle by the individual former owners in trying to avoid this happening will be harrowing. However, in every society there are winners and losers and it can be a cruel world. We should not forget that the world does not owe us a living; does not need mankind to survive. It has seen species dominance rise and fall and we may be just another. The world’s economies must be looked upon in that way to. There is constant change, but always remember, for each individual, as well as destruction, change can mean opportunity.

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