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FIGGY

Some Help Understanding Inflation And The Impact On House Prices

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OK I'm now getting myself very confused but if I'm getting confused then I expect others are so I'll put my neck out and say HELP.

I'm looking at a house and have got the selling price of other similar houses in the road over the past 10 years.

Similar houses sold in 2003 for £180k so if I run this number through a inflation calculator it will tell me what that would be in "today’s money" it says £227,000. The house I'm looking at its £230,000 SO am I right in thinking that if I buy at this price, I'm in reality buying at 2003 prices?

Then i get my self really confused as people are saying inflation will make your house worth less BUT it will also make your debt worth less (if wages wise inline with inflation, but house prices stay static) so what is it? The way I see it is inflation is bad for those who own their home (if house prices don’t rise with inflation) but good for those who have a mortgage as their wages go up and the debt gets smaller.

OR am I missing something very very obvious?

Edited by FIGGY

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OK I'm now getting myself very confused but if I'm getting confused then I expect others are so I'll put my neck out and say HELP.

I'm looking at a house and have got the selling price of other simila houses in the road over the past 10 years.

Simila houses sold in 2003 for £180k so if I run this number through a inflation calculator it will tell me what that would be in "todays money" it says £227,000. The house I'm looking at its £230,000 SO am I right in thinking that if I buy at this price, I'm in reality buying at 2003 prices?

Then i get my self really confused as people are saying inflation will make your house worth less BUT it will also make your debt worth less (if wages wise inline with inflation, but house prices stay static) so what is it? The way I see it is inflation is bad for those who owen their home (if house prices dont rise wiith inflation) but good for those who have a mortgage as their wages goe up and the debt gets smaller.

OR am I missing someting evry very obvious?

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OK I'm now getting myself very confused but if I'm getting confused then I expect others are so I'll put my neck out and say HELP.

I'm looking at a house and have got the selling price of other similar houses in the road over the past 10 years.

Similar houses sold in 2003 for £180k so if I run this number through a inflation calculator it will tell me what that would be in "today’s money" it says £227,000. The house I'm looking at its £230,000 SO am I right in thinking that if I buy at this price, I'm in reality buying at 2003 prices?

Then i get my self really confused as people are saying inflation will make your house worth less BUT it will also make your debt worth less (if wages wise inline with inflation, but house prices stay static) so what is it? The way I see it is inflation is bad for those who own their home (if house prices don’t rise with inflation) but good for those who have a mortgage as their wages go up and the debt gets smaller.

OR am I missing something very very obvious?

Err.. 230k is 230k...

CPI/RPI relates to a basket of goods that people on average buys it, but you are not an 'average' person...

Comparing to your wages is probably a better measure (house as number of times of your 2003 salary vs today salary)

Edited by easybetman

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FIGGY the past 10 years is probably not a good guide to just what would be a reasonable price, given that it was a bubble, with prices boosted by lax lending and easy credit, which is why the banks are in trouble; it is also why the near zero interest policy is in place to save the banks and try to put a floor under house prices.

It is generally acknowledged by sane people that house prices are too high. I'm sure someone will supply the exact figure but it something like house prices went up 180% when wages were up 60%, the gap made up by credit and pulling more dual income households into the equation.

Whether the crash will happen and to the extent that is needed is open to debate. But at the end of the day, it will be your money, your future and your debt, by asking the question it shows some awareness of the issues and removes some of the sentiment.

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Err.. 230k is 230k...

CPI/RPI relates to a basket of goods that people on average buys it, but you are not an 'average' person...

Comparing to your wages is probably a better measure (house as number of times of your 2003 salary vs today salary)

In that case why does anyone on here bother talking about nominal falls if inflation has no impact on house prices. I understand the salary argument but it cant be used when looking at an individual house. I cant use mine as over that time frame its gone up 400%due to promotion.

Edited by FIGGY

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OK a working example then.

The nationwise calculator shows the below

Results:-

A property located in South West which was valued at £180000 in Q1 of 2003, would be worth approximately £232233 in Q1 of 2011.

This is equivalent to a change of 29.02%

But the BoE tells me inflation has run at 26.3% over the same period so real haouse price increase is only 3%. Is the point that I'm missing that historically house prices havent kept pace with inflation and that over the last 10 year we have come to belive (and see)that it will. The government aim is that it wont do this over the comming years??

Sory about the thinking out loud.

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Divide the house price now by your wages and do the same in 2003, see what the difference is, inflation is good if your wages follow it, bloody bad if they don't. Big debt miraculously becomes little debt with Big inflation if your wages rise enough, I'm pretty sure house prices are not inflationary as such though? else we would have seen a UK Zimbabwe by 2006.

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Divide the house price now by your wages and do the same in 2003, see what the difference is, inflation is good if your wages follow it, bloody bad if they don't. Big debt miraculously becomes little debt with Big inflation if your wages rise enough, I'm pretty sure house prices are not inflationary as such though? else we would have seen a UK Zimbabwe by 2006.

Yep, I know they are not included in the inflation figs BUT you cant view houses outside inflation as ist all part of the same asset/debt basket.

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Yep, I know they are not included in the inflation figs BUT you cant view houses outside inflation as ist all part of the same asset/debt basket.

No your right, anything going up in price is inflationary but not all is measured by the figures, good job as well? we all might see a glimpse of the real world

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OK a working example then.

The nationwise calculator shows the below

Results:-

A property located in South West which was valued at £180000 in Q1 of 2003, would be worth approximately £232233 in Q1 of 2011.

This is equivalent to a change of 29.02%

But the BoE tells me inflation has run at 26.3% over the same period so real haouse price increase is only 3%. Is the point that I'm missing that historically house prices havent kept pace with inflation and that over the last 10 year we have come to belive (and see)that it will. The government aim is that it wont do this over the comming years??

Sory about the thinking out loud.

I use 3% inflation per annum when I calculate the "value" of a property but that assumes a sensible start point ... I wouldn't say that 2003 was a sensible start point as the bubble was already starting to form. Anyway 180,000 * 1.03 ^ 8 = 228,019 but I'd knock a lot off for the bubble formation up to the 2003 point, or alternatively using zoopla or houseprices to get a more sensible start point (c2000). Hope that helps?

As for government policy, sad to say it as I voted for change but this lot are as bad as the last lot for looking after the housing vested interests and short of an external shock beyond their control then I think we are in for a long haul rather than a "pop" to get a reasonably priced roof over our heads i.e. nominal prices stagnant but inflation (c5%) cutting them down ... whether or not wage inflation keeps up with that is an entirely different conversation!

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No your right, anything going up in price is inflationary but not all is measured by the figures, good job as well? we all might see a glimpse of the real world

Why we pay any attention to the figures is beyond me? we all know inflation is way higher then they ever state, if they're using dodgy figures to make policy based on them how will that policy ever be the correct one.

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I use 3% inflation per annum when I calculate the "value" of a property but that assumes a sensible start point ... I wouldn't say that 2003 was a sensible start point as the bubble was already starting to form. Anyway 180,000 * 1.03 ^ 8 = 228,019 but I'd knock a lot off for the bubble formation up to the 2003 point, or alternatively using zoopla or houseprices to get a more sensible start point (c2000). Hope that helps?

Good shout, I found one that sold in 2000 for £120k so todays inflation price is £165k, I think that may be a better starting point to see what a "normal" house price would be for the road and where you could expect prices to fall back to.

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Good shout, I found one that sold in 2000 for £120k so todays inflation price is £165k, I think that may be a better starting point to see what a "normal" house price would be for the road and where you could expect prices to fall back to.

Not sure what you mean by that? My basic understanding is that there has been no wage inflation for a long time. Cheap credit took it`s place. An inflationary environment without credit, and no wage inflation is the worst of all worlds for house prices? I would expect prices to be back to late 90`s at least in the next few years. For Scotland, that would translate to tenement flats in central Glasgow/Edinburgh at about 60 - 80k. the real V nominal thinking is to me pointless without wage inflation. I just think multiples of income without Liar Loans and assuming no other debt.

Edited by dances with sheeple

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Not sure what you mean by that? My basic understanding is that there has been no wage inflation for a long time. Cheap credit took it`s place.

Exactly. CPI/RPI is irrelevant. Wage inflation is the only relevant inflation for housing affordability measures, and we've probably got wage deflation now.

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Exactly. CPI/RPI is irrelevant. Wage inflation is the only relevant inflation for housing affordability measures, and we've probably got wage deflation now.

As I said earlier, divide wages by your house price in 2000 and today, see what the rise or fall is to you

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Exactly. CPI/RPI is irrelevant. Wage inflation is the only relevant inflation for housing affordability measures, and we've probably got wage deflation now.

What about credit inflation?

When the credit taps are turned on we have HPI whether wages rise or not.

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OK I'm now getting myself very confused but if I'm getting confused then I expect others are so I'll put my neck out and say HELP.

I'm looking at a house and have got the selling price of other similar houses in the road over the past 10 years.

Similar houses sold in 2003 for £180k so if I run this number through a inflation calculator it will tell me what that would be in "today's money" it says £227,000. The house I'm looking at its £230,000 SO am I right in thinking that if I buy at this price, I'm in reality buying at 2003 prices?

Then i get my self really confused as people are saying inflation will make your house worth less BUT it will also make your debt worth less (if wages wise inline with inflation, but house prices stay static) so what is it? The way I see it is inflation is bad for those who own their home (if house prices don't rise with inflation) but good for those who have a mortgage as their wages go up and the debt gets smaller.

OR am I missing something very very obvious?

If I was making offers now, it would be at below 2000 prices. People will not accept this reality yet, so we have to wait for the train wreck to really implode IMO. Life in the UK is set for a radical shake up over the next couple of years IMO.

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Inflation of goods etc when your wages are stagnant makes property less affordable, not more. You have less take home pay available for housing when you're spending more on fuel,food,etc. There has been no wage inflation for at least ten years, and from this point on the money you'll have available for housing will reduce due to falling or stagnant wages, higher taxes, and higher priced essentials. Take this into account when considering what you're prepared to pay. There is no price it should be, there is what the seller can get.

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What about credit inflation?

When the credit taps are turned on we have HPI whether wages rise or not.

The politicians, bankers and many VI`s are already comfortable, they have made their money from the ponzi and invested it to protect themselves? Giving the sheeple credit is not a priority just now? The banks won`t be brought down by a property crash, just over - indebted sheeple?

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Inflation of goods etc when your wages are stagnant makes property less affordable, not more. You have less take home pay available for housing when you're spending more on fuel,food,etc. There has been no wage inflation for at least ten years, and from this point on the money you'll have available for housing will reduce due to falling or stagnant wages, higher taxes, and higher priced essentials. Take this into account when considering what you're prepared to pay. There is no price it should be, there is what the seller can get.

What about benefits such as family credit etc boosting incomes so they are more than just bare wage figures?

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The politicians, bankers and many VI`s are already comfortable, they have made their money from the ponzi and invested it to protect themselves? Giving the sheeple credit is not a priority just now? The banks won`t be brought down by a property crash, just over - indebted sheeple?

That implies there is a limit to their greed.

It's clear that high house prices favour those groups and re mortgage restrictions Grantley Shapps said "it's no good shutting the stable door after the horse has bolted".

The banks have instructed the government to extend SMI so they will continue to get paid by taxpayers on behalf of the over indebted sheeple.

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What about credit inflation?

When the credit taps are turned on we have HPI whether wages rise or not.

Cheap / available / lax credit is what fuelled the boom, I definitely agree with you on that (although I wouldn't call it credit inflation, but that's just me being picky). And if cheap credit comes back in size, then prices go start going back up.

But we all hope that ... cheap credit + irrational exuberance -> big losses for banks + the sheeple start to fear -> HPC (eventually).

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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