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House Price Crash Forum

Exponential House Price Growth 10% Yoy


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HOLA441

We hear about house price falls in terms of year-on-year or from peak. But many people who were buying at or near the peak were expecting continued growth and if they were investors they had quite possibly based all their calculations on continued growth. So their 'phantom boom extrapolation' graph would probably indicate prices at something like 15% above mid 2007 prices by now. So adding 15% to the 20% falls from peak, a lot of people's houses are probably worth 35% less than they hoped they'd be worth now when they bought them.

Edited by blankster
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HOLA442
My dear old Mum and Dad paid 2,500 for their first house in 1968.

The same house was on the market last year for 110,000.

Can you work out the annual rate of monetary inflation, err I mean appreciation in value.

If it was £110,000 last year, it is worth about £90,000 this year and falling.

If it was £110,000 in 2007, then in 1998, it was worth less than half,

probably about £50,000.

(These are real figures, not guesses.)

So 1968 to 1998 (30 years) £2,500 to £50,000.

1998 to 2007 (9 years) £50,000 to £110,000

2007 to 2012 (5 years) £110,000 to £60,000 ?

Working out average YOY 9.9% doesn't really tell us much.

And besides, best wait till 2012 to get an accurate figure.

Edited by PotNoodle
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HOLA443
Not if some bank came out with liar car loans on the basis that car prices only ever rise! That old Volvo is about the same size as the modern S60, but did the former version have ABS, air-con, power steering, etc? :lol: The CPI measure actually hedonically adjusts for such qualitative improvements and classifies it as deflation!

Two things:

If you think the nearest equivalent to an 144 is an S60, which retails at £19,000, then the contrast is even greater. (6.8% inflation over 40 years)

Also, the fact that the S60 has all those extra gadgets the 144 didn't should make it more expensive again, emphasising the ridiculousness of the last decade's HPI.

Edited by Dave Spart
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HOLA444
Guest sillybear2
Two things:

If you think the nearest equivalent to an 144 is an S60, which retails at £19,000, then the contrast is even greater. (6.8% inflation over 40 years)

Also, the fact that the S60 has all those extra gadgets the 144 didn't should make it more expensive again, emphasising the ridiculousness of the last decade's HPI.

And of course houses deteriorate just like cars, a house from the 60's era probably has a dodgy roof. Obviously the cost of materials and labour has risen over time, but what these housing indexes are actually measuring is land price inflation. That old thorny issue again.

As for qualitative improvements, the UK now builds the smallest homes in Europe, that again tells you something about the land issue.

Edited by sillybear2
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HOLA445
Any chance of running those numbers again using the current national median house price and projecting out for the next 50 years assuming that the growth figure is the same as what it was for the last fifty years?

Use Excel

=sum(A1*1.1)

Change the 1.1 to whatever percentage value you like, 5% would be 1.05.

Have a ball, see how rich we are all going to be :)

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HOLA446
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HOLA447
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HOLA448
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HOLA449
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HOLA4410
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HOLA4411
My how you complicate things!

All I did was type in the Windows calculator: 110000 / 2500 = x^y 0.025 =

and Bob's your uncle. (0.025 being approx. 1/39 where 39 is the no. of years of the appreciation.)

I was trying to do it step by step, to show people the value of logs.

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HOLA4412
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HOLA4415
As for qualitative improvements, the UK now builds the smallest homes in Europe, that again tells you something about the land issue.

The land issue is a scandal -- take a look at Google Maps in Satellite mode --- they could easily build more generously WHEREVER they build in many cases -- and they should be imprisoned if they cram so many "units" in to make dog kennels.... There should be a minimum scale rule - and standards of building should be FAR higher....

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HOLA4416

I just did the calculations on my house... it works out that in the 7 years I owned it, it went up 16.5% per year, over a period of 7 years.

If I say my starting price was the [initial price + the essential works needed on it], then it still went up 14% every year over that period. That is why I felt I had to sit in it ... because there's no way I could ever earn that much per year in a job, so I daren't move out or I'd never be able to afford another one if I dropped out of ownership for 1-2 years.

Viewed compared to income from a job, it was "earning" me £45-50k/year gross at the point when I sold. Crazy....

It was when I spotted the potential for a crash actually happening that I put it up for sale. I figured if I didn't sell it then I'd be trapped in it another 7 years while the price went down again.

Edited by ScaredEitherWay
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HOLA4417
Viewed compared to income from a job, it was "earning" me £45-50k/year gross at the point when I sold. Crazy....

It was when I spotted the potential for a crash actually happening that I put it up for sale. I figured if I didn't sell it then I'd be trapped in it another 7 years while the price went down again.

They should re-name it: The National Property Lottery

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HOLA4421
Guest sillybear2
Or

Ponzi National

But that just sounds like a horse race.

The Grand National Ponzi... a single day where all those crappy and borderline illegal house lotteries are drawn.

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HOLA4422
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HOLA4423
My dear old Mum and Dad paid 2,500 for their first house in 1968.

The same house was on the market last year for 110,000.

Can you work out the annual rate of monetary inflation, err I mean appreciation in value.

Its a total of 9.9% year on year - so yes nearly 10% year on year for 40 years

But you need to split the gain down to its 2 elements:

a) general inflation including wage inflation

B) excessive HPI

Using http://www.bankofengland.co.uk/education/i...flash/index.htm inflation has averaged 6.6% a year.

So the house should be worth £32k, but instead its worth £110k.

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  • 4 years later...
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HOLA4424

It's worth looking at this, since it seems to show that the OBR are expecting a major house price boom of about 10% p.a. (or that's how I read it - private dwelling investment is going up by 10% a year, I assume that that's not a prediction about DIY).

Though, not to worry, because private sector wages will also be shooting up, but only at about 6% p.a.....

Peter.

Thought this quote could do with being on this thread.

Obr Gdp Growth Projections Based Upon Increased Household Debt

Edited by interestrateripoff
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