| Topic: | Re:Higher commercial rents | |
| Posted by: | Dan Murphy | |
| Date/Time: | 15/01/12 07:20:00 |
| Andrew is right - I was just explaining the reasons, not defending them in any way. I did point out that the logic does not bear much scrutiny. But, even so. What it shows is that the market is not working. There is an imbalance betwen what the landlords need to charge in rent to cover interest payments, and what the tenants can afford to pay. Unfortunately, when we are in time of recession and customers have less money to spend, they will not patronise high cost restaurants or shops and so these businesses suffer. If we then legislate to reduce their rents, the landlords go out of business instead of the shopkeepers because they cannot afford to maintain their interest payments to the banks who lent them the money to buy the property. Why should we then not legislate to reduce the interest payments and shift the pain from the shopkeeper to the landlord, and thence from the landlord to the bank? If we simply choose who should be "let off the hook" by deciding that some people are hardworking, and other are greedy, how do we know we will get it right? Are there no hardworking landlords who simply timed the transaction wrong? I am not trying to make a defence for it, I'm just pointing out that once we start to interfere in the workings and dynamics of these things we may simply end up shifting pain to the wrong place. If we le the market take its natural course, then those businesses which took on rents or interest payments which they now cannot afford will go bust. the banks which lent them the money (which, as it turns out, they should not have borrowed) will end up with bad debts on their balance sheets. In this case, the government did decide to legislate, and take money from the taxpayer and use it to shore up the banks balance sheets - was this a good or a bad thing? My own view is that whenever governments decide to legislate to try and rebalance the dynamics of any market, they get it wrong. So I can understand the natural instinct to try and "save" the poor shopkeeper from the clutches of the greedy landlord, but if the business doesn't make enough money to pay the costs then who should bail it out? |