Tuesday, 4 March 2014

"Where's that confounded bridge?"

Continuing my occasional series of posts on land values with titles swiped from Led Zeppelin song titles or lyrics from their albums "Houses of The Holy" and "Physical Graffiti", emailed in by Lola from Money Week/The New World:

... on 17 November, the Penang marathon took place on Penang Bridge for the last time. From now on, the annual competition will take place on the recently completed Penang Second Bridge, which, at 24km, is the longest link in Southeast Asia. The first bridge, which was state of the art not long ago, can’t handle the volume of traffic.

Since the announcement of the bridge project in 2006, land prices in Batu Maung have leaped from RM50-60 per sq ft to around RM250-300 per sq ft. New apartments, which used to cost between RM250,000-300,000 each, now cost between RM700,000-800,000. And there’s a lot more to come from the infrastructure boom in this part of Asia.

The article doesn't say what the new bridge cost to build, but let's pencil in RM2 billion as a reasonable guess (three times as much as the old one).

That means that the bridge could have been funded by collecting the land value uplift on 209 acres (one-third of a square mile) or on 4,200 apartments.

The size of area and/or number of actual or potential apartments which will benefit is of course a huge multiple of that - probably several hundreds of times as much.

So as per usual, the question is... who paid for the bridge and who will benefit most?


DBC Reed said...

London has had the City Bridge Trust for centuries which has raised so much money from tolls and later property deals that it easily covers the upkeep of the bridges and now chucks money at good causes in general.It is a pillar of the City Establishment whereas supporters of LVT are regarded as
dangerous theorists of mad schemes that could never work.

Mark Wadsworth said...

DBC, agreed, the fact that we can give a million examples where LVT works exactly as intended in practice, it's never good enough.

Bayard said...

You'd think that the government would have realised this in advance and bought those 209 acres before the bridge was sold and then sold them afterwards, but I suppose that's a bit naive. Presumably, much of the windfall gain went into the pockets of the Rich and Influential and that was part of the purpose of building the bridge in the first place.

Ben Jamin' said...


That's been suggested to the UK Government for the capture of windfall gain from planning permission granted on farmland.

Dismissed as Commie nonsense.


From that Moneyweek article, this link.

So if you are a poor struggling satellite town, pay Ikea and Waitrose a bung to set up shop and watch the good times roll?

The Ikea/Waitrose index. The next big thing for clued up property speculators.

Mark Wadsworth said...

B, the chances are that they sold off those 209 acres to friends and family before building the bridge.

Bj, Waitrose usually come along last. IKEA are trailblazers though.

Bayard said...

Mark, of course, that's how the world works.

BJ, anything that takes money out of the pockets of the R&I is dismissed as Commie nonsense. I have suggested a 95% tax on capital uplift through gaining PP before on this blog, but it's not a popular idea.