HOUSING SUPPLY, PROFIT AND HOUSING PRODUCTION: THE CASE OF THE UNITED KINGDOM, THE NETHERLANDS AND GERMANY

Andrew Golland [Paper first received, January 1996; in final form, March 1996]

ABSTRACT This article investigates the relationship between housing production in the private sector and profitability in three European countries: the United Kingdom, the Netherlands and Germany. The relationship between private sector production and profitability is suggested by Ambrose and Barlow (1987) to be an important contributory factor to understanding levels of house building in Europe. The article utilizes a model of 'profitability" based upon three variables: house prices, land prices and building costs. The model is considered with other theories relating to housing production. These are:first, the way in which governments organize housing production, second, the mode of housing development," and third, motivations of house builders themselves. These issues are shown through the results to be significant in explaining why trends in the three countries are dissimilar. The conclusions are that a private sector functions better where government plays a'strong steering role, particularly in the land market. The relationship between production and profit is weak where systems of supply exhibit a high degree of speculative activity or where new production relies upon the decisions of individual households rather than firms. The article raises particular questions of definition and comparison. These are in relation to the "private sector" and to the profit model itself.

1 Introduction Housing production is important, both as a means of fulfilling housing need and as an economic indicator. In the past, however, differences and similarities in housing production between countries have been explained within very broad frameworks -- by reference to, for example, 'convergence' (Donnison and Ungerson, 1982), 'stages of economic development' (Bums and Grebler, 1967) or 'structures of housing provision' (Ball and Harloe, 1992). These 'broad' frameworks have been variously challenged for their validity (Schmidt, 1989) and for their eclecticism (Oxley, 1991). It is helpful, therefore, when more specific reasons are provided. Ambrose and Barlow (1987:111) have argued that three

Neth. J. of Housing and the Built Environment, Vol. 11 (1996) No. 1.

factors are important in influencing the level of new house building. These are: first, 'direct capital investment by the state for public housing'; second, 'state support for production and consumption'; and third, 'changes in the profitability of house builders in the private sector'. Whilst the first two of these factors are significant, they are difficult to measure in the comparative context. The third 'explanation' is the one with which this paper is concerned, namely the relationship between 'private sector production' and 'profitability'. Indeed, production by the 'private' sector is important today, given the apparently declining role of social or public housing (Emms, 1990; Priemus, 1995). The concern of governments to expand home ownership within Europe raises questions about how suppliers can be motivated to produce housing of this tenure. 'Profitability' is one potential 'motive'. This paper considers the extent to which 'profit' is a determinant of housing supply in the 'private' sector of three countries: the United Kingdom, the Netherlands and Germany. These countries provide examples of very different systems of housing supply, where land policy, housing markets and development processes create individual constraints and opportunities. The performance of the 'private sector' is examined over the period 1970 to 1993. This is considered sufficient time to account for periods of political and economic change. 'Germany' is taken to be 'West' Germany over the period 1970 to 1990. The ability to carry out this comparison, however, requires a careful interpretation of what Ambrose and Barlow (1987) mean by 'changes in profitability of house builders in the private sector'. The main deffmitions which have to be clarified are the 'private sector' and 'profitability'. This needs to be done before proceeding to the main objective of the paper, which is to examine the relationship between 'profitability' or 'profit' and 'private sector' production. Sections 2 and 3 discuss these issues. As a consequence, a number of further definitional questions are raised; in particular, these concern 'profit' and its determinants; house prices, land prices and building costs. To achieve the main objective, the paper takes a number of steps. First, it looks at the issue of 'profitability' and how it might be modelled. In Section 2, a model is provided and its potential utility discussed in the context of previous research. The discussion of 'private sector' housing suppliers follows in Section 3, where an overview of trends in production is given. Section 4 analyses the development process and the role of the state therein. This may be considered as the environment in which housing suppliers operate. Section 5 presents data on the variables used to reflect levels of 'profit' for the private sectors of the three countries. It discusses house prices, land prices and building costs and analyses the comparability of the available data sets. This information is collated in Section 6 to offer a single 'profit' data set, which is then correlated against production levels in the private sector. Conclusions to the investigation are drawn in Section 7.

2 Framework for analysis: 'profit' and theories of housing production The modelling of Ambrose and Barlow's 'profitability' is not lightly undertaken. 'Profitability' can be a function of many different and complex processes. The way in which it arises is not necessarily the same in different countries. This section provides

a model through which 'profitability' or 'profit' is considered in relation to production in the 'private' sector. Ambrose and Barlow use the term 'profitability' as an explanation for the level of new house building in the private sector. What is meant by this term is not explained, probably because they are concerned with the broader production picture. 'Profitability', however, can be measured in several ways. It would be possible, for example, to take the 'profit and loss' accounts of house building companies and relate these figures to production levels. Alternatively, the financial market standing of house builders (the stock markets' reflection of a company) may give an indication of the 'profitability' of the house builder. In some countries these approaches may work. In the United Kingdom, for example, where volume house builders represent the 'private sector', these measures may be appropriate. In a comparative context, however, this is not always possible. Often significant levels of private housing production emanate from builders whose accounts are not publicly quoted. Alternatively, as is the case in Germany, private housing is initiated not by companies but by individual households. This sort of problem means that any model adopted must be adaptable to comparison. The model adopted is a simple one. It is based upon the idea that suppliers of housing in the 'private' sector will be motivated to produce in accordance with the 'potential profitability' of the operation. Hereafter this is termed 'profit'. Under these circumstances, builders construct housing in accordance with the supply curve assumptions of neo-classical economics that, ceteris paribus, the higher the price, the greater the quantity supplied (Begg et al., 1989:44). This is argued to mean that the more profitable the operation, the greater the propensity to supply. Given these assumptions, 'profit' 'Tr', might most appropriately be determined as follows: 7r = HP-[LP+BC], where: HP = House Prices, LP = Land Prices and BC = Building Costs. It is assumed that housing suppliers provide more housing as the gap between HP and LP+BC (and hence profit) increases, and vice-versa as profit decreases. If, by chance, these are the only variables governing levels of house building, then under these assumptions, there may be no limits to the amount of housing which can be built: production would rise in accordance with profit. Similarly, when 'profit' falls to nil, or becomes negative, no housing would be constructed. These assumptions may prove accurate; the 'private sector' in the comparative light might be regarded as a relatively autonomous entity, having, for example, few connections with government or being motivated solely by 'profit'. It is the objective of this investigation to follow through the model proposed. Yet it is also helpful to put such assumptions into the context of other theories of housing supply and housing production. It is important to suggest, if such a model cannot be shown to work, why this might be. First it might be held that levels of housing production in any particular sector will be linked to production in other sectors. This may be the case where total levels of

housing production are regarded as being fixed by demographic trends. Housing production levels in any one sector may then not be unlimited because there is a 'ceiling' created by total housing need. If this be the case, then government decisionmaking plays a very important role and production in the 'private' and 'social' sector may be inter-dependent in some way. One sector may be regarded as performing a 'residual' role to the other. Such a focus has been provided by Malpass (1990) for housing production in the United Kingdom since the early 1980s. Indeed, the relationship between different sectors may be a critical one for the question of how 'profit' motivates 'private' production. It touches upon the relationship between governments, markets and housing suppliers. Recent research has picked up this theme with an interest in the way in which systems of housing supply are integrated (B.M. Bau, 1993; Bramley, 1994: 1). A recent German government report has emphasized the importance of understanding the consequences of 'simple' or 'complex' systems (B.M. Bau, 1993: xxxii) and the way in which different facets of supply are related. Brussaard (1986:4) has suggested 'facet' planning, (facetbeleid) to be a hallmark of Dutch public policy, whilst Chiddick and Dobson (1986: 13) have highlighted poor co-ordination within housing supply in the United Kingdom. Whether a system is strongly or loosely 'integrated' may ultimately provide a key to understanding the relationship between 'profit' and production in the 'private' sector. If a system of supply is well co-ordinated, it may provide governments with the ability to regulate housing production in line with changes in housing demand; from 'private' to 'social', for example. However, the potential to co-ordinate must be linked with decision-making. Governments must interpret trends in housing markets accurately, and therefore it does not follow that strongly integrated systems will allow housing production to respond freely to market trends. A second theoretical issue questions the construction of the model of 'profit' assumed in this paper. This considers the relationship between housing suppliers and the development environment in which they operate. It questions simply whether the model assumed reflects the way in which development is actually carried out in any one or more of the three countries. It is evident from recent research that a high priority is being given to this 'environment'; consistently, the role of 'land' in the model of housing supply is questioned. Sometimes the interest is of a general nature (MVROM, 1991a; B.M. Bau, 1995). At other times there is an attempt to say something evaluative about land supply and its implications for housing production (Barlow and Duncan, 1994; B.M. Bau, 1993). Needham (1992), for example, has analysed in detail land supply through the public sector, whereas Barlow and Duncan (1994) have compared three different modes of land supply in Britain, France and Sweden. The main purpose in mentioning these studies is to emphasize that although a 'private' sector is considered, this 'sector' may operate under different circumstances. In Sections 3 and 4 it becomes apparent how this applies in the United Kingdom, the Netherlands and Germany. These circumstances may be relevant, however, not only in so far that 'land' (as an element in the model of 'profit') is considered, but also for housing markets. The recent report of the German government (B.M. Bau, 1993) has shown how very different housing markets are in Europe. It has shown some housing markets to be very 'busy', with high turnover, whilst others can be said to be less

active. In so far as the theory is concerned, the implications of these differences may be questioned; in particular, how strongly linked are these ('existing') housing markets to new housing production activity? In other words, it is possible that new housing production is linked in very different ways to existing housing markets. Given the potentially differing role of 'land' and 'housing' markets, a model of 'profit' may not necessarily be (as is assumed in this investigation): ~r = HP-[LP+BC] but may lay more emphasis upon certain elements, whilst ignoring others. example:

For

7r = HP-BC, which may apply where 'land' is regarded as an uncomplicated issue in the development process. Alternatively 'house prices' may be regarded as an insignificant factor in determining new housing production for any number of reasons. In that hypothetical scenario, the model of 'profit' would be better expressed as: r = LP+BC, where production would simply be motivated according to the 'inverse cost' of new housing, rather than the 'value' of existing housing. In other words, the lower the total 'costs' ('land' and 'building'), the higher might be the level of production. A third focus of theory has been upon the motivation of house builders themselves. Ball (1988: 19) questions the ability of economic theory to deal with the operation of markets. He forwards an agency approach to understanding outcomes in preference to theories of monopoly and perfect competition, since the latter are unable to deal with 'structural' relations between the agencies of supply. Healey (1991: 224-232) has also given weight to the 'agency' standpoint in her review of the development process. These theories, however, are difficult to empirically prove, since the significance of particular agencies cannot be 'measured' in a comparative context. Rather, perhaps, it should be kept in mind, that 'profit' may play a differing role in housing production for the 'private' sector in different countries. The motivation for 'private' production need not necessarily be 'profit-maximizing'. Production can also be motivated by 'own use' or 'consumption' objectives.

3 House building in the 'private' sector To understand the extent to which housing production in the 'private' sector relates to 'profit', it is necessary to consider what can be meant by the 'private' sector, and the degree to which it can be compared. Comparing housing production in a particular sector is a potentially complex task. The 'private' sector might be any production which is not connected at all with actions

of the state. It might be considered production which is neither directly constructed by the state (local authorities or other 'government bodies') nor financially sponsored by the state. Production by a 'private' sector might further be expected not to have a 'social' element and be primarily for owner-occupier end users. In practice, it is very difficult to separate these issues out. To find a sector that is not in some way dependent upon government is very difficult. In the United Kingdom, for example, 'private' housing developers receive no direct supply subsidy from government for housing construction. However, the demand for their product is supported by government tax relief to housing consumers. In that sense, this source of production might be argued to fulfill a 'social' need since government provides f'mancial support. In the Netherlands, production by 'market builders' is to some extent influenced by the state. This is so because even when production is classified as being 'unsubsidized' it can rely upon municipal involvement in land supply. In Germany, 'private households' can take advantage of the government-sponsored FSrderungswege in order to promote housing. Production under these .schemes is classified as 'social housing' (Oxley and Smith, 1993:12), and this can be either for rent or for ownership (Ulbrich, 1991: 286). German 'private households' can produce a potentially broad array of different forms of housing. These are, however, said to be the exceptional arguments rather than the rule. They are a form of theoretical extremes. Whilst they may serve to frustrate comparison, they do usefully highlight the main focus of comparison which is on 'tenure', 'subsidy' and 'mode of production'. It is on these themes that production is considered in the three countries. Using data from government ministries and statistical bureaus, an overview of housing production in all sectors is provided in Figures 1, 2 and 3. Figure 1 shows production in the United Kingdom for the period 1970 to 1993. Figure 1 Housing production in the United Kingdom, 1970-1993 Thousands 400 300 200 100 0

mLocal Auth

mHsg Assn r"lNew Town ~Private Sect

Source: DoE Housing and Construction Statistics. 10

Data provided by the Department of the Environment's Housing and Construction Statistics divides housing production into five main groups. Of these, production by new towns authorities is fairly small in the general context of production. Production by local authorities and by housing associations ('Hsg Assn', Figure 1) is more significant. This is seen as 'social' or 'public' housing and suppliers have traditionally operated in a non-profit maximizing way. Then there is the 'private sector'. Housing production in this sector has a number of characteristics. Firstly, it is almost wholly produced for owner-occupation. Second, it is produced, as was stated above, largely in the absence of government supply subsidies. Finally, the mode of production is mainly speculative (Barlow and Duncan, 1994: 42), where house builders have a significant role in both land acquisition and housing construction. The 'private' sector has traditionally relied upon large 'volume' house builders. In the mid- to late 1980s, around 50 percent of all housing production in this private sector was produced by the largest five firms (Gillen, 1994: 4). The importance of this sector can be appreciated from Figure 1. Moreover, its significance has increased over time. This is particularly noticeable since 1979, a time which saw a change of government from Labour to Conservative. From the mid-1980s, production by the private sector increased up to around 90 percent of total production. Since the early 1990s, however, problems in the housing market have meant that this proportion has stabilized at around 85 percent. Generally in the United Kingdom, housing production, whether 'private' or 'social', has proved to be strongly associated with the political party in government. This is evident, for example, in the 1970s. A Labour government increased local authority production significantly between 1974 and 1979, after a period of greater private sector activity under the Conservative government of 1970-1974. Private sector production was encouraged again under the Conservative governments of the 1980s. Housing production in the Netherlands is conventionally categorized into three main sources of supply (CBS): state or municipal housing production; housing association production; and production by 'market builders'. Production in the state sector and production by housing associations is classified as 'social' housing and has historically been influenced to a large degree by subsidies. Analysing production by 'market builders' is a somewhat more complex task. Market builders, whilst building housing 'mostly' in the owner-occupied sector (Boelhouwer and Van der Heijden, 1992: 56), nevertheless build also for the private rented sector. In the latter, they produce for beleggers, or institutional investors (Priemus, 1984: 56; Boelhouwer and Van der Heijden, 1992: 56). In the former ('ownership') category, the opdrachtgever, or client, can be a private individual or can be a building finn producing housing for the market. Of the housing which is built for owner-occupation, there is a further division into housing which is built with the aid of subsidies and that which is built 'without subsidies'. The picture of house building can appear therefore with production divided into five sectors (Figure 2). Production of housing for ownership 'without subsidy' is broadly comparable with the 'private sector' in the United Kingdom in terms of the tenure of housing that is produced and in terms of the lack of supply-side subsidy. Production in this sector is also reliant upon 'market' conditions from the demand side. The house building 11

Figure 2 Housing production in the Netherlands, 1970-1993 Thousands 200 150 100 50 0

IState I H s g Assn ~iMkt Build (0/0 Sub). ~ M k t Build (0/0 Unsub).

r--nMkt Build/Priv Rent.

Source: CBS.

operation is to some extent speculative in that 'projects are undertaken at builders own cost and risk' (Boelhouwer and Van der Heijden, 1992: 57). Yet there has traditionally been little speculation in land, a consequence of land supply mainly through municipal hands (Needham, 1992). Hence, although market builders do carry the responsibility for selling houses, until very recently their involvement in the land market has been less significant. Speculation is now becoming a bigger issue, however (Dordregter and Rijckevorsel, 1995: 1-4). Nonetheless, historically, housing production for unsubsidized ownership might best be seen in terms of an opportunity to maximize the profit from contract house building. Production of the 'private' ('unsubsidized ownership') sector over time fluctuates significantly ('0/0 Unsub'; Figure 2). Production levels were high in the late 1970s, a time when the private housing market boomed. Production virtually disappeared, however, in the early to mid-1980s, when the market slumped. These developments have been documented by Priemus (1989). More recently, since the late 1980s, the sector has begun to recover in line with central government promotion of owneroccupation (MVROM, 1989) and a stronger housing market. Generally, production in this sector, and indeed other sectors, can be argued to be affected less by political change than is the case in the United Kingdom. This may result from a political situation in which the search for consensus is a greater feature (Andeweg and Irwin, 1993: 171-172). Data on housing production in Germany is perhaps the most difficult to desegregate of the three countries. Whilst statistics for many different sources of housing supply are available, defining a 'private' sector is difficult, a consequence of several issues. Perhaps the most important is the fact that housing in the social sector does not have 12

to be constructed by registered institutions, as is the case in the Netherlands and to a large extent in the United Kingdom. Social housing can be constructed by individuals, institutions or development companies (Boelhouwer and Van der Heijden, 1992: 115). Due to the way in which these suppliers attract funding, there are potential difficulties in distinguishing between housing production which might be considered 'private' and that which could be described as 'social'. This is particularly the case for 'rented' housing (Oxley, 1995). Official data on housing production is segmented into production by Unternehmen and 'Private Households' (B.M. Bau, 1994). Unternehmen, or enterprises, of housing production considers individuals involved in producing private housing for rent, it considers the registered housing associations, Gemeiniitziger Wohnungsunternehmen, Wohnungsbaugesellschaften, which are limited building companies, and it considers investment funds. On average, this category of housing suppliers accounted for around 35 percent of housing production during the 1980s (Figure 3). Data exists for production by Unternehmen. The most significant are the Freie Unternehmen and the least important are the municipalities. The Unternehmen sector is amalgamated in Figure 3, since the concern is with the role of 'private households', the largest single source of supply. The figure shows this contribution to total housing production. Helpful to the present analysis is the fact that this sector has 'mainly' (Boelhouwer and Van der Heijden 1992: 118) produced housing for owner-occupation over the last 20 years. Calculations using official data suggest that on average (19701993) around 70 percent of all production by 'private households' is for owneroccupation and does not utilize state supply subsidy (Golland, 1995). Dwellings produced in such a way are termedfrei-finanziert (Jenkis, 1994: 464) in that they rely

Figure 3 Housing production in Germany, 1970-1993 Thousands 800 600 400

~

i

'

'

:

'

:

:-i

'

i

i

!

i

i

i

i

200 0 ~U'nehmen r~Private Households Source: StatistischesBundesamt. 13

Table 1 Comparison of private sectors

United Kingdom

Netherlands

Germany

Private housing supplier

Tenure of housing produced

State subsidy available

Mode of production

'Volume' house building firm

Owneroccupation

None to supplier,but indirect through consumer

Speculative: land and housing construction

Private market builder: contracting firm

Owneroccupation

None to supplier,but indirect through consumer

Private household

Owneroccupation

Limited tax relief to household

Firm assumesrisk in building operation, but not land until recently Limited speculative activity

on finance from a variety of private sector sources: equity capital, bauspar (savings schemes) and the mortgage banks. Where they rely wholly upon private funding, private households can qualify for special tax relief associated with their loan repayments (Jenkis, 1994: 464). Private households may speculate in land, although a 'speculation tax' applies on land sold within two years of acquisition (Dieterich et al., 1993: 88). Production by 'private households' has been significant over time (Figure 3). Production as a proportion of all production reached a high point during the late 1970s, a period of boom in the German housing market. Interestingly however, production by this sector has not fluctuated (as a proportion of total production) significantly. It has remained at around 60 percent of total production. As in the Netherlands, political change appears not to be too significant for the sector. There is no change apparent in production outcomes from the 1970s, a decade in which the Social Democrat coalition governments predominated, to the 1980s and 1990s, when Christian Democrat coalitions have been in power (L6sche, 1993: 202-205). As a conclusion to this section, it is perhaps useful to provide a summary of the main issues relating to the comparison of the 'private sector' in the three countries. This is shown in Table 1.

4 Housing supply, state intervention and the development process The relationship between private sector production and profit is affected by the environment in which development takes place. In Section 2 it was argued that this 14

environment was conditioned in an important way by the role of government in the development process. This section reviews the private sector development processes of the three countries by reference to the role of the state and to the individual sectors of housing supply. Three main stages of housing development can be identified: I. Land acquisition and sale; II. Servicing and infrastructure provision; HI. House building. In the United Kingdom, these three functions are carded out largely by organizations not in the public domain (B.M. Ban, 1993: 183). During the 1980s and 1990s trends in housing production have meant that private housing developers have been the primary agents at all three stages. They operate in both land markets and in house building, and they finance these operations from their own sources or the capital market (B.M. Bau, 1993: 183). These developers can be seen as 'self-suppliers' of building land. They purchase land for their own uses. They also trade land in both short and long term. They undertake for the greater part the servicing and infrastructure provision. Housing developers play a multi-functional role, linking the new house building process with the performance of existing housing markets. Table 2 summarizes the model of the development process in the three countries. In the Netherlands, the public sector plays a greater part in the process of development. Indeed, the first two stages (Table 2) of land acquisition and installation of infrastructure have been traditionally undertaken by municipalities. They are under no statutory duty to do so (B.M. Bau, 1993: 138). However, this is not seen to be a function of the private sector due to the very high risks involved. These are largely in the form of the costs of land preparation resulting from the low-lying ground (Faludi, 1989: 5-10). 'Land preparation' may be regarded as an additional stage in the process which is generally not necessary in the other two countries. It is important to state that municipalities fund these operations ('land preparation' and 'infrastructure provision') themselves, although costs will be recovered in the land price.

Table 2 Private Country United Kingdom Netherlands Germany

housing development processes Land acquisition/sale

Infrastructure & services

House building ('private' sector)

Housing developers

Housing developers

Housing developers

Gemeente (municipality)

Gemeente (municipality)

Market builders

Private households

Gemeinde (municipality)

Private households (under contract)

15

House builders in the private sector are in the main reliant upon municipalities for the supply of serviced building land. This can work in two ways. First, there is always a supply of land 'on tap' (Needham, 1992: 684) which can, in theory, benefit them. However, since municipalities are the main land acquirers, there have been traditionally few opportunities for would-be housing developers to speculate in the land market. The 'development process' (Table 2) is therefore normally a function of both public and private sector activity. The development process for the 'private' sector in Germany differs from the United Kingdom and the Netherlands. In Germany, land plots are often purchased by households specifically interested in the construction of housing for their own use. At a second stage (Table 2), households who have already purchased plots will be reliant upon the Gemeinde, or local authority, to ensure that services are installed. How this occurs, and the extent to which household or municipality is involved, will depend upon the circumstances. Sometimes there is no need for municipal involvement (B.M. Bau, 1993: 143). Much of the cost of this infrastructure, up to 90 percent (B.M. Bau, 1993: 144) can be recouped from the households themselves. A key feature of the process of development at this stage is known as Umlegung. This is essentially the 'replotting of land' (Dieterich et al., 1993: 66). It is an instrument available to municipalities which enables 'unfavourable' private land boundaries to be changed in favour of municipal objectives for roads, servicing and public space. Umlegung is a statutory procedure which can have important consequences for the role of households wishing to construct dwellings. The final stage of the process is house building. This is normally contracted out and the project supervised by an architect (B.M. Bau, 1993: 171).

S House prices, land prices and building costs: data sources, definitional issues and basis of comparison The model provided in Section 2 is built upon three variables: house prices, land prices and building costs. This section provides data on these factors and discusses the issue of comparability. The aim is to provide data relating to costs and prices per dwelling. Hence the concern is with establishing house prices, land prices per plot and building costs per dwelling.

i) House prices Data on house prices is generally provided in two main forms. The first covers the prices of 'all' housing which includes both new and existing housing. The second covers the prices of 'new' houses. A complete data set for new house prices was only identified in the case of the United Kingdom, however. The comparison of house prices is therefore affected by a lack of comparable price data for new dwellings in the three countries. House prices are based upon the average price of housing in the existing housing market. This assumes that new housing production is linked with existing housing markets and the average price of housing. The house price data set used for the United Kingdom represents all housing in the 16

housing market. The trend in house prices provided by this data set may be anticipated to influence new house building to a significant extent, given the importance of the second hand housing market in the United Kingdom. The house price data set used for the Netherlands is that published by the Nederlandse Vereniging van Makelaars (NVM) and which relates to the average price of housing in the existing housing market. The trend provided by this data set can be linked strongly with the trend in new production in the private sector. This is especially the case for the period of boom and slump during the late 1970s and early 1980s. In Germany, the Ring Deutscher Maklers (RDM) provides data on house prices in various sectors. The data set used in the German case is the price of detached owner-occupied housing. This choice is made since this type of housing is most representative of production by German private households (Ulbrich, 1991: 282). The sourcing of data sets is shown in more detail in Table 4.

ii) Land prices Data on land prices in different countries is determined largely by the way in which development is carried out: data is available for land at differing stages of the development process. Data on land is also available as a consequence of the way in which the state controls prices. The only common denominator across the three countries appears to be prices or values for agricultural land. Land prices in the United Kingdom are provided by the Department of the Environment's 'Housing and Construction Statistics' (DOE, 1993). The data relates to the 'private sector purchase of sites for residential use with four or more plots'. The data over the period 1970 to 1993, quoted for England and Wales, is available in the form of price per plot or price per hectare. Where the price is 'per hectare', this has, in the analysis, been divided by the 'mean density of plots per hectare'. The price of land from this data set represents all land purchased by private developers. Much of this land is assumed to be land with planning permission. For the Netherlands, data on land prices is more voluminous: data provided by the Housing Ministry can be divided into land for 'market' sector building and 'social' sector house building. There are also additional categories, which distinguish between land for 'subsidized' housing production and 'unsubsidized' housing production. Data is also available for the mean price at which municipalities purchase land and also for the price at which they dispose of it to house builders. These data sets are available in the form of plot prices. For this analysis, the data used is for plot prices in the 'nonsubsidized owner-occupied housing' sector of serviced land sold by municipalities. Land prices in Germany are provided also in line with the process of development. Two of the most important stages are land in the 'raw' state, Rohbauland, and land at the 'building ripe' stage, Baureifesland. Prices are given by the Statistisches Bundesamt in aggregate for the whole country, expressed in values per m 2. The difference between these two sets of land prices relates to the issue of infrastructure. Rohbauland is land zoned in the Bebauungsplan, but without infrastructure (Dieterich et al., 1993: 106). Baureifesland has the necessary services and is hence more expensive. The data set used, however, is sourced from the Ring Deutscher Maklers (RDM), which provides

17

Table 3 Sourcing of land prices

UK (England and Wales)

Netherlands

Germany

Data sources

Basis of comparison

Land purchased by private sector (DOE) Plot prices

Plot prices in private sector. Adjust + 45 % for infrastructure

Land purchased/sold by municipalities (in non-subsidized owner-occupied sector), (MVROM, 1991b: 1982-1991, Klaren & Verpalen, 1989: 1970-1981) Plot prices

Plot prices of land sold by municipalities for the non-subsidized owner-occupied sector

Baureifesland

Plot prices of detached family houses

(BMBau) Plot prices (RDM)

a consistent data set for plot prices for detached family houses. In the case of the Netherlands and Germany, finding a basis for comparison is perhaps less difficult since the concern is with land which is ready to be built upon and is already provided with the main roads and services. In the case of the United Kingdom, the data represents unserviced land. A comparable data set does not exist since in the United Kingdom the cost of infrastructure is undertaken mainly by the private sector, who do not record these costs. However, research has been undertaken (Conran Roche, 1989) to establish the value or cost of this element. This has suggested that land costs can be increased by around 45 percent due to the provision of infrastructure. Table 3 provides a summary of the discussion and sourcing of land prices.

iii) Building costs Building costs, as a third element in the analysis, provide perhaps the largest margin for comparative error. When explaining why, for example, building costs constitute a higher proportion of total dwelling costs in some countries than in others, we might make reference to issues of housing quality, building regulations or housing type. When attempting, however, to suggest that building costs are comparable, it is necessary to be clear about what is meant by this. 'Building costs' can be categorized by reference to a number of operations (Contract Journal, 1994: 12): - Site works, shell and finishes; - Heating, ventilation and plumbing; - Electricity; - Professional fees.

18

The data on building costs in the foregoing analysis is derived from a variety of sources, which include all four of these major elements. Data on building costs in the United Kingdom is derived from the Building Cost Information Service of the Royal Institution of Chartered Surveyors (RICS, 1994). The data utilized is the cost o f 'Estate' type housing in the size range 75m 2 to 100m 2. Data for building costs in the Netherlands is derived from the Central Bureau of Statistics' (CBS) journal Maandstatistiek Bouwnijverheid. This provides the average cost of dwellings in the 'non-subsidized' sector. The data set is derived from a base year dwelling cost of Nlg. 126,000 for the year 1988, which is then indexed against the CBS yearly index of building costs. House building costs in Germany are available as an aggregate o f all housing production, and given as a cost per dwelling (B.M. Bau, 1994: 58). This dwelling type is an Einfamilienhaus, a single-family dwelling. Table 4 provides a summary of data sources used as a basis for the comparative analysis. It synthesizes information from this and the previous section.

Table 4 Summary of house prices, land prices and building costs Country United Kingdom

Netherlands

Germany

Production sector

House prices

Land prices

Private sector house builders (DOE)

Price of all housing in the housingmarket (DOE)

Plot prices in the private sector (DOE)

Market builders producing non-subsidized housing (CBS)

Average price of housingin the existing housing market (NVM)

Production by private households (B.M. Ban)

Price of detachedowneroccupied houses in existing market (RDM)

Building costs Average costs 'estate type' housing (RICS)

Serviced plots Average house sold by building costs in municipalities to the non-subsidized house builders sector (CBS) in non-subsidized owner-occupier sector (MVROM, 1991b, Klaren & Verpalen, 1989) Building plots Average for detached building costs family houses for single-family (RDM) houses (B.M. Bau)

19

6 Profit and housing production The previous sections have established a framework by which production in 'private' sectors of the three different countries can be compared with a measure of 'profit'. This section plots the trends in these two variables over time. It provides coefficients of correlation for the relationship in each country and analyses why they provide differing outcomes. Initially, however, the method of measuring production in the 'private' sector should be explained. The way in which 'production' can be measured is mainly twofold. This can be done either by using absolute data or by taking the proportion of private sector production which constitutes total housing production. There are arguments for and against both methods. The use of 'absolute' values (i.e., production volume as given) can be adopted where it is believed that there are few constraints on the activities of a particular sector. That is to say, the ('private') sector may be seen to function fairly independently of the influence of government decision-making about its role or the role for other sectors. This is a classical view of the economic functioning of housing markets. The approach, however, tends to ignore the possibility that individual sectors involved in production can be influenced by both the overall trend in production and by competition between sectors which is influenced by state subsidies. In so far as this paper as concerned, this point is important. Total housing production can be seen to fall in all three countries. Figures 1, 2 and 3 show these declines. It is suggested that the analysis of any sector takes these broader trends into account. The use of 'absolute' data values for the private sector may lead to entirely different conclusions which cannot discount these significant trends. This idea is returned to briefly at the end of this section since a preference is expressed for the use of 'percentages' as a mode of analysis. Figure 4

Private sector housing production and profit in the United Kingdom, 1970-1993

Private sector production as %'age of total production)

100 80

-=

60 40 20 0

Source: Various: see Table 4.

20

~Production --Profit

One further point of clarification to make about the trends is that 'profit' is expressed in real terms. 'Real' profit (Appendices 1,2 and 3) is calculated by dividing 'nominal' profit by the consumer price index for each country (United Nations). The correlation coefficients are Pearson coefficients. Figures 4, 5 and 6 show the relationship between 'profit' and housing production in the private sector, as defined in Section 3 of this paper. Figure 4 shows the relationship between the two variables in the United Kingdom. The trends are derived from the data sets in Appendix 1 and from the production trends in Figure 1. The Pearson coefficient of correlation which results from an analysis of the two trends over the period 1970 to 1993 is 0.225. This is a positive figure showing that as profit increases, production also increases, and vice-versa. The relationship, however, may be seen to be not particularly strong, This is argued to result from a phenomenon of two main trends which can be linked with periods of political change. First in the 1970s (1970-1980), the trend was much stronger (correlation coefficient of 0.506). This was a period in which land markets, in particular, were more highly regulated. For the second period (1981-1993), the correlation coefficient is 0.311. During this latter period, predominantly under the Thatcher governments, land, planning and housing policy instruments were relaxed in favour of private sector solutions. Whilst the relationship between the variables is positive in both periods, it is a much looser association for the 1980s. This structural difference does not allow therefore the overall coefficient (0.225) to be strong. Figure 5 shows the trends for the two variables 'private sector production' and 'profit' in the Netherlands. These trends are based upon the data in Appendix 2 and derived from the production trends in Figure 2.

Figure 5

Private sector housing production and profit in the Netherlands, 19701993

Market builders as %'age of total housing production)

40 30 20 10 0 -10 -20 -30

--Production ~ P r o f i t Source: Various: see Table 4.

21

Figure 5 shows a positive relationship between production by market builders in the non-subsidized owner-occupied sector and the profit available from the relationship between house prices, land prices and building costs. A correlation coefficient of 0.369 results for the period 1970 to 1993. This is a stronger association for the two variables than in the United Kingdom and is considerably different from that in Germany (Figure 6). Why it is 'stronger' is an issue considered shortly. We might add at this point, however, that as in the United Kingdom, the trends can be associated to some extent with policy changes. Perhaps the most important of these is the similar shift towards private sector solutions in land and housing policy. These have occurred mainly since the mid-1980s. It is evident from the trends in both countries that a divergence is occurring. That is to say that whilst changes in 'production' are still linked to 'profit' in a positive way, there is apparently 'more production' coming from 'less profit'. We return also to this point below. The highest correlation occurs for the Netherlands over the period 1975-1985, a time of growth and slump in housing and land markets. Figure 6 provides the trends for the two variables 'private sector production' and 'profit' in Germany. These trends are based upon the data in Appendix 3 and on the production trends in Figure 3. The relationship between production by private households and profit is entirely different from that in the other two countries. It is not only weaker but it is also a negative correlation. For the period 1970-1993, the coefficient is -0.108. As is evident from Figure 6, production seems hardly associated with 'profit'. The proportion of total production from private households is maintained at around 60 percent, whilst 'profit' can be shown to fall. The result is 'negative'. In theory, this means that as one variable rises, the other falls, although the weakness of the relationship makes such

Figure 6 Private sector housing production and profit in Germany, 1970-1993 (Private households as %'age of total production)

80 ~ 70 60 50 40 30 20 10 0

~Pro~ction ~ofit Souse: V~ious: see T ~ l e 4.

22

a hypothesis questionable. In common, however, with the other two countries, there is a divergence of the trends from the late 1970s onwards.

7 Conclusions The investigation of the relationship between 'profit' and 'production' reveals a number of significant comparative issues. The aim of the paper was to try to apply a simple model of 'profit' across three countries in which systems of housing supply differ. The focus was on the the private sector in each of these countries and the way in which it responded to changes in profitability. 'Profit' was expressed in terms of three variables: house prices, land prices and building costs. The 'private' sector was measured in terms of the annual percentage of total housing production. The study considered the period 1970 to 1993. The main conclusion of the investigation is that the model adopted cannot be applied across all three countries. Whilst in the Dutch case there is strong association between the two main variables; profit and private sector production, this relationship is weak in the United Kingdom and Germany. Why might this be the case and to what extent do the results reflect differing theories of housing production? Section 2 provided three reasons why the model may not work. These were related to the role of government in housing supply, to the development environment in which private sector housing suppliers operate, and to the motivation of the sectors in supplying housing. These three factors influence assumptions about the model: 7r = HP-[LP+BC] In the Dutch case, the model is seen to work well; the strong steering role of government in housing production is important, where coordination between central government, municipalities and housing suppliers influences the tenure of housing produced to a significant extent. Particularly significant is the role of the municipality in land supply. Responsibility for housing production depends upon this stage of development. It is important for municipalities to anticipate changes in the housing market and dispose of land to different sectors, private and social, accordingly. The model may work well where the state at central and local level takes such decisions. It may also work well where housing suppliers in the private sector are not in a position to profit from land. 'Land' and 'building' elements of the model become costs. Housing production then becomes a function of the difference between these costs and the price of housing. This is in line with the assumption of the model. The results for the United Kingdom show a weak association, although this is positive for the period 1970 to 1993. The main reason for the weak association is seen to lie in the operation of land markets. A system of housing supply in which the private sector development industry plays such a significant role in the supply of land is seen to be a major factor in determining the results. Particularly important is the ability of private sector firms to profit from land deals and transactions as well as from the operation of house building. This factor may lead to the conclusion that assuming 23

'land' to be a cost element in the model is not necessarily an accurate portrayal of the development process of this sector. Such an event may almost certainly affect the association between profit and production. It may also be instructive to note that the association is stronger in the 1970s than in the 1980s; the 1970s being a period in which the state attempted to intervene in land markets, whilst the 1980s are characterized as a period of deregulation. This change in policy asks the question of whether the shifting relationship between government and housing suppliers should be accommodated by different models of profit for different periods of time. This may be helpful in understanding the case of the United Kingdom. The association between profit and production by private households in Germany is the weakest of the three countries. It is also a negative relationship. This result is seen to be a consequence of a number of differing and potentially complex factors. The model 7r = HP-[LP+BC], when applied to production in Germany, may be questioned from several angles. First, it is necessary to ask about the role of land prices in the development process. Land prices may be regarded as a 'cost' (as for private sector suppliers in the Netherlands) or as both cost and source of profit (as in the United Kingdom). Whichever is the case depends upon how the development process functions in Germany. Where private households operate speculatively, then the process becomes more similar to the United Kingdom. Where they buy land in order to build housing for their own use, the process is quite different; under these circumstances land may be regarded as a 'cost' within the equation. The timing of new development by private households in Germany should also be considered from the other side of the equation. That is to say, we should look also at the role played by the existing housing market and house prices. In this respect it may be concluded that private households in Germany function differently than private sector housing suppliers in the other two countries. An important link should be made between housing supply and housing consumption in this respect. In Germany the model of housing supply usually assumes that the supplier of housing will also be the consumer or occupier. This factor may lead us to question the significance o f house prices being included in the model at all. Whereas in both the United Kingdom and the Netherlands private sector suppliers will have regard to price movements in the housing market, the decision to build in Germany may be unrelated to this factor. Under these circumstances the two 'cost' elements, 'land' and 'building', may provide a better predictor of production levels. The very differing results produced by the investigation of profit and production in the three countries lead to further research questions. These questions may be addressed more precisely towards the relationship between governments and housing suppliers, or towards the apparent differences in the functioning of land or housing markets. Alternatively there may be a more focussed discussion on the motivation of housing suppliers within the differing development processes. Research in any one of these directions may reveal why it is often so difficult to apply simple models in the comparative context.

24

Acknowledgement The author would like to thank Professor Michael Oxley of De Montfort University for his helpful comments during the preparation of this article.

References Andeweg, R., and G. Irwin (1993) Dutch Government and Polities, London: Macmillan. Ambrose, P., and J. Barlow (1987) "Housing Provision and House Building in Western Europe: Increasing Expenditure, Declining Output?", in Van Vliet, W. (ed.), Housing Markets and Policies under Fiscal Austerity, pp. 111-125, London: Greenwood Press. Ball, M. (1988) Rebuilding Construction, Economic Change and the British Construction Industry, London: Routledge. Ball, M., and M. Harloe (1992) "Rhetorical Barriers to Understanding Housing Provision: What the 'Provision Thesis is and is not' ", Housing Studies (7), no. 1, pp. 3-15. Barlow, J., and S. Duncan (1994) Success and Failure in Housing Provision: European Systems Compared, Oxford: Elsevier Science Ltd. Begg, D., S. Fischer, and R. Dornbusch (1989) Economies, London: McGraw-Hill. B.M. Bau (Bundesministerium fiir Raumordnung, Bauwesen und St~idtebau) (1993) Funktionsweise st~dtischer Bodenm~irke in Mitgleidstaaten der Europ~iischen Gemeinschaft: ein Systemvergleich, Bonn, Bad-Godesburg: B.M. Bau. B.M. Bau (Bundesministerium f/Jr Raumordnung, Bauwesen und S~dtebau) (1994), Hans und Wohnung. Im Spiegel der Statistik, Bonn, Bad-Godesburg: B.M. Bau. B.M. Bau (Bundesministerium ftir Raumordnung, Bauwesen und St~dtebau) (1995) Baulandbericht, Bonn, Bad-Godesburg: B.M. Ball. Boelhouwer, P., and H. van der Heijden (1992) Housing Systems in Europe: Part 1, Delft: Delft University Press. Bramley, G. (1994) "The Housing and Planning Relationship", paper presented to the Housing Studies Association Autumn Conference 1994. Brussaard, W. (1986) The Rules of Physical Planning, Den Haag: Ministerie van Volkshuisvesting, Ruimtelijke Ordening en Milieubeheer. Burns, L.S., and L. Grebler (1967) The Housing of Nations, London: Macmillan. CBS (Central Bureau of Statistics), Maandstatistiek Bouwnijverheid, Voorburg: CBS. Chiddick, D., and M. Dobson (1986) "Land for Housing - Circular Arguments", The Planner, March, pp. 10-13. Conran Roche (1989) Costs of Residential Development: Final Report prepared for the Department of the Environment, London: Conran Roche; [attributable to: Barlow, J. (1993) "Controlling the Housing Land Market: Some Examples from Europe", Urban Studies, (30)no. 7, pp. 1129-1149]. Contract Journal (1994) The Cost of Being British, Contract Journal 14 July, pp. 1213. 25

DoE (Department of the Environment) (1993) Housing and Construction Statistics, HMSO. Dieterich, H., E. Dransfeld, and W. Voss (1993), Germany: Urban Land and Property Markets, London: U.C.L. Press. Donnison, D., and C. Ungerson (1982) Housing Policy, Harmondsworth: Penguin. Dordregter, P.H., and J.M. Rijckevorsel (1995), "Gemeenten machteloos op dynamische grondmarkt", B+G: Uitgave Bank Nederlandse Gemeenten en Vereniging van Nederlandse Gemeenten, no. 5, May/June, pp. 16-22. Emms, P. (1990) Social Housing: A European dilemma?, Bristol: SAUS. Faludi, A. (1989) "Keeping the Netherlands in shape", Built Environment (15) no. 1, pp. 5-10. Gillen, M. (1994) "Volume House Building Companies: Identification and Economic Influence", paper presented to the European Network for Housing Research Conference, Glasgow, 29 August - 2 September 1994. Golland, A. (1995) "Housing Supply and Housing Production: The Case of the United Kingdom, the Netherlands and Germany", Ph.D. Dissertation, De Montfort University. Healey, P. (1991) "Models of the Development Process: A Review", Journal of Property Research (8) no. 3, pp. 219-238. Jenkis, H. (1994) " D i e Wohnungsbaufinanzierung; Die Entwicklung der marktwirtschaftlichen Wohnungsbaufinanzierung bis heute", in Jenkis, H. (ed.), Kompendium tier Wohnungwirtschaft, Oldenburg: Mtinchen. Klaren, H.H., and J. Verpalen (1989) "Position Paper for the Netherlands", Project Group on Urban Land Markets, Organization for Economic Cooperation and Development. L~sche, P. (1993) Kleine Geschichte der Deutschen Partein, Mtinchen, Kohlhammer Verlag. Malpass, P (1990) Reshaping Housing Policy: Subsidies, Rents and Residualization, London: Routledge. MVROM (Ministerie van Volkshuisvesting, Ruimtelijke Ordening en Milieubeheer) (1989) Nota Volkshuisvesting in de Jaren Negentig; van bouwen naar w o n e n , MVROM, Den Haag. MVROM (Ministerie van Volkshuisvesting, Ruimtelijke Ordening en Milieubeheer) (1991a) Foreign land policy in a Dutch perspective, MVROM, Den Haag. MVROM (Ministerie van Volkshuisvesting, Ruimtelijke Ordening en Milieubeheer) (1991b) Grondprijzen en kavels 1991, TAUW Infra Consult B.V. NVM (Nederlandse Vereniging van Makelaars), "Intern", NVM. Needham, B. (1992) "A Theory of Land Prices when Land is Supplied Publicly: The Case of the Netherlands", Urban Studies (29) no. 5, pp. 669-686. Oxley, M. (1991) "The Aims and Methods of Comparative Housing Research", Seandanavian Housing and Planning Research (8), pp. 67-77. Oxley, M., and J. Smith (1993) Social Housing in Europe, Working paper of the School of the Built Environment, De Montfort University.

26

Oxley, M. (1995) "Private and Social Rented Housing in Europe: Distinctions, Comparisons and Resource Allocation", Scandanavian Housing and Planning Research (12), pp. 59-72. Priemus, H. (1984) "Bouwprocesen Woningbouwmarkt", Volkshuisvesting in theorie en praktijk (5), Delft: Delft University Press. Priemus, H (1989) "The Owner-occupiedmarket in the Netherlands", Housing Finance International, May. Priemus, H. (1995) "How to abolish social housing? The Dutch case", International Journal of Urban and Regional Research (19), no. 1, pp. 145-153. RDM (Ring Deutscher Maklers) (1995) Preisspiegel, Hamburg: RDM. RICS (Royal Institution of Chartered Surveyors) (1994), Building Cost Information Service, Kingston-upon-Thames: RICS. Schmidt, S. (1989) "Convergence Theory, Labour Movements and Corporatism: the Case of Housing", Seandanavian Housing and Planning Research (6), pp. 83-101. Ulbrich, R. (1991), "Die Bauherren als Anbieter", in Jenkis, H. (ed.), Kompendium der Wohnungswirtschaft, Oldenburg: Mtinchen. United Nations, Annual Bulletin of Housing and Construction Statistics, United Nations.

About the author

Andrew Golland is a Research Fellow at the Department of Land Management, De Montfort University, in Leicester, U.K.

27

APPENDIX 1

House prices, land prices and building costs in the United Kingdom

Year

House prices

Land prices

Building costs

Nominal 'profitability'

Cons price index

'Real profitability'

1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993

4974 5632 7373 9941 10989 11786 12703 13649 15593 19924 23593 24187 25553 28592 30811 33187 38187 44220 54280 62135 66745 66825 63425 66158

1228 1347 2102 2866 2987 2305 2338 2760 3600 4403 6475 7015 7740 8331 8788 12056 16583 21613 26346 27483 28602 23105 19134 17943

3079 3260 3442 3985 4936 6114 7155 8242 9258 10462 12545 13904 15126 16123 17119 18116 19021 19746 20833 22645 24094 25362 26086 27173

667 1025 1829 3090 3066 3367 3210 2647 2735 5059 4573 3268 2687 4138 4904 3015 2583 2861 7101 12007 14049 18358 18205 21042

100 109 117 127 148 185 216 250 272 306 357 396 425 449 467 489 499 521 531 570 613 642 661 677

667 940 1563 2433 2071 1820 1486 1058 1005 1653 1280 825 632 921 1050 616 517 549 1337 2106 2291 2859 2754 3108

Sources: Home prices: DoE (1993). Land prices:DoE (1993). Building costs: RICS (1994). Consumer price index: United Nations.

28

APPENDIX 2 House prices, land prices and building costs in the Netherlands Year

House prices

Land prices

Building costs

Nominal 'profitability'

Consumer price index

Real 'profitability'

1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993

76884 78346 84194 89354 98126 102598 131838 184126 198746 187222 171054 153424 138030 142072 139578 140094 146974 153940 160092 171570 174494 180400 194800 212400

25027 28011 32167 39243 45034 43426 58866 53719 68837 68194 74627 89746 43104 37416 36990 47751 49498 48937 43979 49124 52038 50234 51273 53270

44625 51187 55125 61687 70875 76125 82687 90562 98437 107625 116812 120715 116812 116812 116812 115500 116812 122061 126000 128625 131250 135183 140437 145687

7232 -852 -3098 -11576 -17783 -16953 -9715 39845 31472 11403 -20385 -57037 -21886 -12156 -14224 -23157 -19336 -17058 -9887 -1034 -8718 -5017 3090 13443

100 107 116 125 137 151 164 174 181 188 200 213 224 228 234 238 238 236 234 236 242 252 269 287

7232 -796 -1984 -9261 -19740 -11227 -12769 22899 17387 6065 -10192 -31563 -9770 -5331 -6078 -9729 -8124 -7227 -4225 -4381 -3602 -1990 1149 4684

Sources:

House prices: NVM. Land prices: MVROM (1991b), 1982 to 1991; Klaren and Verpalen (1989), 1970 to 1980. Building costs: CBS. Consumer price index: United Nations.

29

APPENDIX 3

House prices, land prices and building costs in Germany

Year

House prices

Land prices

Building costs

Nominal 'profitability'

Consumer price index

Real 'profitability'

1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 t981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993

138421 144836 170555 195789 202142 222000 216250 221745 220483 250370 272666 304558 321818 318793 308214 287241 291515 284428 289955 324102 360395 365369 393357 416309

44464 48862 52928 61600 52750 53400 53857 57611 65142 77181 100173 101640 116172 127038 119000 111230 115551 104806 113742 122230 131571 138717 148097 157469

98348 106900 121500 136500 152300 157200 162500 169800 180100 198800 215200 235800 252900 255100 247100 247800 249400 258100 261700 271300 280900 298700 319900 336900

-4391 -10926 -3873 -2311 -2909 11400 -107 -5668 -24804 -25611 -42707 -32882 -47254 -63345 -57888 -71789 -73436 -78478 -85487 -69428 -52076 -72048 -74640 -78060

100 105 111 119 127 135 141 147 150 157 165 175 183 189 192 197 195 195 197 200 204 210 216 224

-4391 -10405 -3489-1942 -2290 8444 -75 -3855 -16536 -16312 -25883 -18789 -25821 -33515 -30150 -36441 -37659 -40245 -43394 -34714 -25527 -34308 -35481 -34848

Sources: House prices: RDM (1995). Land prices: RDM (1995). Building costs: B.M. Bau (1994). Consumer price index: United Nations.

30