The value creation of property rights

Dear friends and colleagues,Yes we do suffer from a steep property market correction! Yet have we addressed the correct questions?Is it just the badly regulated incentives in mortgage lending that kept extending loans to those who could not afford one; or also the fact that we are dealing mainly with the novelty of the subprime market and not knowing how to value it properly?I claim that when property rights are securely established prices are less distorted and values easier to define, because all assets are in the pool and there is minimal uncertainty. When property rights are not well determined, or there is doubt regarding their security, an insurance premium is applied correcting the rights’ information. It would be interesting to check the security of property rights in the subprime in addition to its novelty. I would start by applying Reality Check Analysis to identify the level of security of the rights and help correct it to avoid future problems that tend to attack the poorer and low middle class.These are some ideas for further conversation that I also thought to address in my future presentations. The next stops of the book presentation is at the EBRD in London U.K. on July 1; Trinity College Dublin, Ireland July 4.



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