Forget digital, land is the most precious commodity. In the age of information technology it is “inevitable” that we value most what that economy can’t create
LONDON – A recent report revealed that the five richest families in Britain are worth more than the country’s poorest 20% combined. Some of the wealth comes from new business ventures; but two of the five are a duke and an earl whose ancestors owned the fields across which London expanded in the nineteenth century
Urban land is therefore rising in value – in London, New York, Shanghai, and many other cities – partly because of consumer demand. But its rising value also makes it an attractive asset class for investors, because further price increases are expected. Moreover, returns on real estate have been swollen by the dramatic fall in interest rates over the last 25 years, a decline that was far advanced even before the 2008 financial crisis.
The cause of those low interest rates is debated; but one probable factor is the reduced cost of business investment in hardware and software-based “machines.” If you can build a $170 billion company with just 5,000 software engineer man-years, you don’t need to borrow much money.
Increasing share of consumer expenditure is devoted to buying goods and services that are rich in fashion, design, and subjective brand values, and to competing for ownership of location-specific real estate. But if the land on which the desired houses and apartments sit is in limited supply, the inevitable consequence is rising prices
The fact that technology is so powerful not only makes physical land more valuable; it also means that future employment growth will be concentrated among the jobs that cannot be automated, particularly in services, which have to be delivered physically. The US Bureau of Labor Statistics estimates that among the most rapidly growing occupational categories over the next ten years will be “healthcare support occupations” (nursing aides, orderlies, and attendants) and “food preparation and serving workers” – that is, overwhelmingly low-wage jobs.