In Lady Windermere’s Fan, Oscar Wilde had Lord Darlington quip that a cynic was ‘a man who knows the price of everything and the value of nothing’. Lady Windermere’s Fan was written in 1892, but what Wilde wrote 122 years ago resonates just as much today.
Today, the notion that anyone should even consider ethical, moral, philosophical or cultural values to be on a par with market sentiment is often facing an uphill battle. Housing is a good example.
We all know that housing markets are driven by sentiment. In many instances there is little else that drives booms and busts alike. But to assume therefore that price is an expression of value is not correct. Of course, when price directly affects remuneration in the value chain, it encourages the idea that a property is only worth what someone will pay for it. This is because what someone will pay is based entirely on their knowledge and their desperation.
If comparable data, incentives or a whole host of other dynamics, are not fully understood, an emotional purchase decision can come under severe pressure. Economists call it asymmetric knowledge. It effectively allows one party to gain an advantage, unfair or otherwise, over another. This is not always avoidable but a full understanding of the facts at least allows a purchasing decision to be made in the cold light of day.
Valuers, of course, work for mortgage lenders but second to general practice surveyors, they represent the nearest thing to understanding value and therefore its relationship with price that the industry has. It may seem like a subtle point. Most people confuse the words regularly but to ensure our housing markets remain sustainable, we should not just understand price but appreciate value.