By Bernard Place
WHEN we read analyses of Jersey’s property market, we often turn to familiar explanations: limited land, foreign buyers or speculative developers.
In their column (JEP 19 August), Peter Lucas and Dr Michael J Oliver invite us to look differently. They argue that the main driver of Jersey’s turbulent market has been the global cycle of interest rates and liquidity, rather than purely local peculiarities. Their proposition is elegant: if money is cheap, property prices inflate; if money tightens, they deflate.
There is a great deal of merit in this perspective. Yet Islanders might ask with curiosity rather than criticism: how do economists come to such conclusions and does real life always behave as the model predicts?
The economist’s model: rational actors and equilibrium
I am not an economist, so I hope the authors will forgive what I know is a simplification. Economists are expert at thinking about markets in total. In these models, “actors” behave rationally and with reasonably good knowledge. Buyers and sellers of homes interact with landlords and tenants.
Prices move in response to supply and demand until a balance is found – an equilibrium.
Applied to housing, the logic runs like this: the cost of borrowing affects demand for houses. House prices rise when credit is cheap and fall when it tightens. Because rents are linked to the cost of housing, rental markets should eventually adjust too.
In Jersey, social housing rents are indexed at 80% of private sector rents, tying the whole system together. In the long run, supply and demand will settle into balance: sellers get fair value, buyers affordable homes, landlords fair yields and tenants fair rents.
All well and good. But economists also know that equilibria can occur at levels that are not socially optimal. The 1930s Great Depression is the cardinal example. Housing is not a perfect textbook market.
Where theory diverges from reality
Mr Lucas and Dr Oliver suggest that as property prices fall, new landlords entering the market at lower purchase prices will be able to set lower rents, undercutting those who bought earlier at higher values. In a yield-driven world, this would be logical: buy cheaper, rent cheaper, still make 5% return.
But does this happen in real life? The evidence suggests otherwise. Landlords charge “market rent” – a figure readily visible from estate agents’ windows or the Jersey Landlords Association – not a bespoke calculation based on their personal entry price. Why accept a lower rent if the market is clearing at a higher one?
This explains the “stickiness” of rents. When house prices rise, rents tend to follow, because landlords’ costs and expectations rise. But when house prices fall, rents rarely decline. The market ratchets upward but resists downward pressure.
The statistics bear this out. In 2024, average house prices fell by 8% – the steepest year-on-year decline since records began. Yet 82% of lower-income private renters continued to experience “rental stress”, spending more than 30% of their gross income on housing. Very few, if any, Islanders can point to a rent reduction in the past year. The model predicts falling rents; reality tells a different story.
The fairness gap
Why does this divergence matter? Because it reveals who bears the burden. Homeowners with small or no mortgages are largely insulated. Indebted landlords can pass higher costs on to tenants. And tenants, with limited bargaining power and the ever-present threat of eviction, absorb the consequences.
Fairness does not deny global forces. It asks how local choices shape their impact. Andium Homes, for example, now manages around 5,000 homes, housing about 10,000 Islanders.
That is a substantial public-sector role. Yet because Andium rents are pegged at 80% of private-sector levels, it does not provide a counterweight when rents rise or fail to fall. The system is still led by private dynamics.
Deputy Sam Mézec has recently proposed reforms to give tenants greater rights – longer notice periods, protection from sudden rent hikes and stronger security of tenure. Whether Islanders agree with every detail or not, these ideas illustrate a wider principle: when markets fail to distribute burdens equitably, government has a role to step in. The art lies in doing so sensitively and judiciously to support tenants without choking off investment or creating unintended harms.
Policy implications: distributing risksand rewards
Mr Lucas and Dr Oliver conclude that restoring competitiveness will be slow and painful. They are surely right – but the definition of competitiveness matters. If it means only that house prices eventually settle closer to incomes, then tenants may wait decades for relief.
Through a fairness lens, the goal is not just equilibrium. It is about the distribution of risks and rewards in a housing system. At present, risks fall heaviest on renters. A fairer balance might involve:
- Rental stability measures so tenants cannot be hit with sudden increases unlinked to wages or inflation.
- Public or parish-owned rental housing, not just indexed to the private market, but providing a genuine stabiliser against shocks.
- Diversified tenure – co-ops, rent-to-buy, long leases – that spread access more evenly.
- Migration and housing policy alignment, ensuring new labour demand does not overwhelm rental capacity.
None of this requires abandoning the market. It simply requires recognising when outcomes are inequitable and adjusting the rules so that risks and rewards are more fairly shared for the benefit of all Islanders.
Beyond cycles: fairness as responsibility
Relying too heavily on interest-rate cycles risks absolving us of responsibility. If housing is merely the outcome of global liquidity, our local choices matter little. Yet choices do matter: whether to build family homes or investor flats; whether to strengthen tenants’ rights; whether to recycle public land into affordable schemes.
Mr Lucas and Dr Oliver perform a valuable service in reminding us of the global drivers. But Islanders might fairly ask: how can government ensure that when the tide turns, the burdens and benefits are shared across the whole community?
In the end, Keynes had the last word: “In the long run we are all dead.” Waiting for equilibrium is not enough. Fairness requires action now, not to overthrow the market but to steward it wisely – so that the rewards and costs of housing are distributed for the benefit of the whole Island.
A registered nurse for nearly 40 years, Bernard Place has been a clinician, teacher and researcher in intensive care units. From 2012, he managed departments in Jersey’s healthcare system and from 2015 to 2019 was the clinical project director for Jersey’s new hospital.
