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Something is only worth what someone will pay for it.

April 10, 2010

How is Parcel Y in downtown Saskatoon suddenly worth $11 million dollars?  No one has been willing and able to build on it while the cost was less than $5 million.  Why would the situation change after more than doubling the cost?

That’s like someone doubling the asking price for their house after it had been on the market for a year with no offers.

2 Comments leave one →
  1. Scott Down permalink
    April 13, 2010 11:39 am

    Mmm… Well, something is only worth what someone will pay for it – unless you don’t sell it. You’re forgetting that opportunity cost is a type of worth.

    I am willing to bet that no one has made unsolicited offers to purchase your car from you. I don’t know you or what you drive, but you know that your car is worth more to you than market value because otherwise you’d sell it. You might think your car is for sale, but if someone offered you $78,000 for it, you’d sell it – it’s ‘worth’ to it’s buyer would be higher than it’s ‘worth’ to you.

    So Parcel Y (which, I agree, I wouldn’t pay $11M for) can be worth more to the seller, in this case the City, than the market will offer – and as a result it will sit unsold.

    One benefit to the citizens of such a high price is that it can be lowered for the right bid. Projects that would offer external benefits could be offered a better price, whereas strictly profit-bearing would have to account for the high cost. This makes it more likely that something attractive and egalitarian could be built – which would benefit everyone.

  2. Scott Down permalink
    April 13, 2010 11:41 am

    I misunderstood – I think it may be Remai who is selling the land so high? That is a bit of a different story: if her land sits vacant, she is simply losing a profit which she obviously thinks is worth the risk. Even a simpler equation that if the City owned it (which I thought was the case).

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