This in turn gives rise to speculation , the purchase of land or property not for use but as a speculative investment. But this was also closely associated with over-inflated land and property prices, combined with speculation and profiteering based to a substantial extent on corruption. The deflationary chain thus set in motion still has further to go. Environmental and Economic Effects Looking at the environmental impact, rising land prices tend to favor sprawl, as homes, shopping malls and businesses naturally seek to move out to areas of less value. Yet more seriously, rising land prices are economically regressive, a fact which classical economists decline to recognize.
Prosperity is created by productivity, by increasing value without increasing cost.
And this has a similarly inflationary effect on the services using land, which become more expensive not because they are offering increased value but simply because rents are going up. This is particularly evident in major cities. The escalation of land prices is a major contributor to the high cost of urban living. Likewise the demise of urban centers in the USA came about when steadily increasing rents finally reached the point where businesses could no longer afford them and moved out instead to cheaper green field sites thus creating new suburbs. If the city or town center is to retain or regain and develop its function as a gathering place, it will be necessary to ensure that newly developed areas in city centers, particularly areas reclaimed from public or industrial use, should be subject to price stability so that rents are economic for those low-profit uses such as markets and caf s which provide vitality and enjoyment for users.