Bubble? Which bubble?

From The Telegraph:

Figures released on Monday from index provider IPD show how five years of debt-fuelled gains [in commercial properties] which peaked in July 2007 – exactly the same month as the debt crisis first emerged – have been wiped out in just 18 months.

In capital terms the retail property market is back to 2002, industrial property is back to 1999, while the office market has wound the clock all back to 1998.

For a glimpse of just how far the market sailed from fundamental value look no further than rental values. In the seven years that capital values rose and fell 35pc, rental values rose just 13pc before falling back 2pc. The shallow rise and fall in rental values shows how little the market boom had to do with the underlying economy and how much it had to do with the availability of debt finance.

Exactly, it's as simple as that.

The relationship between business profitability and commercial rents is pretty stable; as is that between earnings and residential rents. The supposed rise in capital values was purely down to easy credit, it was pure bubble, something that would be largely prevented if Business Rates (and other property-related taxes) were replaced with a flat tax on capital values in excess of the bricks and mortar value, points 13 and 14 here.

H/t wdbeast at HPC.