It’s important to note that the land cycle lays the foundation for all other cycles.
We must always view other cycles within the context of what is happening with the land cycle.
In the bull phases of the cycle, land prices will always rise faster than general economic growth for two primary reasons.
Reason 1: Land is not produced. Its supply is fixed in location. Yet we need it for everything we do! We live on it, sleep on it, work on it, play on it.
We derive all our sustenance from it. Look around you and try and find one thing that’s not made of the product of land, and you’ll pull up short!
Simply — there will always be demand for the best sites in town.
Reason 2: The market for land is conducted like a game of Monopoly.
Landowners are rewarded with a great windfall dollop of unearned income (economic rent) from speculating that someone will come along in the future and pay more.
Indicators that signal fair value based on land’s earnings are not there. In a rising market, owners hoard more sites for more gain.
Prices are paid based on the notion that the market will forever increase.
This lays the foundation for why the cycle has repeated, in the same pattern — high inflation, low inflation, fiat monetary system or not — throughout the centuries.
If you read my update a few weeks ago about the oldest housing index in the world, you’ll know we can trace an 18.6-year cycle back to the 17th century in regions of Europe.
In his 1983 book, The Power in the Land, Fred Harrison found a consistent 18-year movement in land values in more than 400 years of British history.
Likely, we could go back a lot further if we had access to good data.
Perhaps even to the time of William the Conqueror!
1066 was a defining point in English history — the Norman Conquest of England.
When William the Conqueror took England, he declared all the land ownership of the Crown.
Keeping a quarter for himself as a personal holding, he gave a proportion to the church and split the rest into ‘manors’.
These he distributed out under strict freehold conditions to his barons.
He understood the value of land and the emotional envy it could inspire; therefore, he was careful not to provide anyone with a proportion large enough to invoke rebellion.
William recorded it all in the famed Doomsday Book.
He wanted a record of who owned what, how much it was worth and how much was owed to him in tax, rent, and military service.
The document is the earliest surviving public record.
It contains a highly detailed survey and valuation of land holdings and resources in late 11th-century England.
There was nothing else like it created in England until the censuses of the 19th century.
We could mark this as the point in England in which real estate became a valuable, personal, and recognised asset — eventually to be traded, sold, and exchanged at the owners’ will.
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