All my money's invested in planning permission. And so is yours

In Britain at least, most people's biggest asset is their house. We are, we like to think, investors in bricks and mortar. Or even investors in land - they are not, the old trope goes, making any more of it. Bricks and mortar and land sound like such wonderfully safe things, such solid things, to imagine your money being invested in. And anyway you need to live somewhere, and you need somewhere to keep your stuff, so it's only sensible to put your money into bricks and mortar and land. We all do it.

This is, of course, not quite true.

Last time I bought a house it was valued at about £350k. For insurance purposes it was necessary to find out how much it would cost to rebuild the whole thing from scratch, and that was estimated at about £120k. For not very interesting reasons I looked into what it would cost to buy a bit of the garden next door and got back an estimate of a few tens of thousands, at most. This is, needless to say, a patch of land in central London which in every practical sense is big enough to build another house on. It just so happens that it's a bit of someone's back garden and there is no planning permission - so it's worth little more than the same size patch of land in Yorkshire or the Outer Hebrides.

Do the maths with me. The land qua land was actually worth say £20k. The bricks and mortar were worth £120k. The "house" was worth £35ok. Mostly what I was buying was planning permission. Something a bit short of a quarter of a million quid of it. For the privilege of being allowed to have a house worth £120k on a patch of land worth £20k.

Look at it another way and everything's fine. Anything is worth what the next guy will pay for it: I was willing to fork over £x and the next guy will fork over roughly £x too. Why worry?

I guess I worry because a society or an economy whose members generally hold the majority of their assets in the form of planning permission might not be in such good shape, even if few of them articulate it in quite that way. Bricks and mortar sounds nice and robust. Land sounds solid. The administrative whims of planning functionaries at the local council...not so much. 

(Photo from Woodleywonderworks on Flickr)