What is the value of a building? To me it seems obvious that a building is an asset and what you want from it is the income from the rents, and the value of it is the NPV of future rents. Anything else is bubbly.
The source of the value is mostly the land, rather than the building. When prices rise, it's actually the land value rising, but we talk about it like 'house prices' are going up.
Causes a guaranteed bubble as you can't make more land, so price rises are not followed by increased production causing the price to fall again.
An excellent point, that is almost universally ignored. NPV of future rents is ignored almost totally in the domestic housing market, and it seems that commercial property is riven with debt fuelled purchases that need another purchase to work.
Causes a guaranteed bubble as you can't make more land, so price rises are not followed by increased production causing the price to fall again.