How capitalist production has revolutionized house building in London can be seen from the evidence given by a builder to the Bank Acts Committee of 1857. In his youth, he said, houses were generally built to order, and the price was paid to the contractor in instalments as stages of the construction were completed. There was little speculative building; contractors would resort to this principally just to keep their workers regularly occupied and hold their labour force together. In the last forty years all that has changed. There is now little building to order. If someone wants a new house, he looks for one that has already been built on speculation, or is already in the process of being built. Today the contractor no longer works directly for a client, but rather for the market; just like any other industrialist, he has to have finished goods for sale. Whereas previously a contractor might have built three or four houses at a time on speculation, he now has to buy an extensive piece of land (in the Continental sense, he leases it, usually for ninety-nine years), erect on it up to 100 or 200 houses, and thus involve himself in an undertaking that exceeds his own means some twenty to fifty times over. Funds are procured by taking out a mortgage, and this money is put at the contractor’s disposal bit by bit as the building of the houses progresses. If a crisis breaks out, bringing the payment of these instalments to a halt, then the whole undertaking generally collapses; in the best case, the houses remain uncompleted until better times, while in the worst they are auctioned off at half price. It is impossible nowadays for any contractor to get along without speculative building, and on a large scale at that. The profit on the actual construction is extremely slight; the main source of profit comes from raising the ground rent, and from the clever selection and exploitation of the building land. Almost the whole of Belgravia, Tyburnia and the countless thousands of villas around London have been built in this way, by speculative anticipation of the demand for houses.
Karl Marx, The Working Period, Capital, Volume 2