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Nationwide Trend Line Showing House Prices "under-Performing

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The standard of discourse in the media is incredible.

Frances Coppola doesn't know much about QE if she thinks it has little effect on house prices.

redfin-price.jpg

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Why does the phrase 'under performing' read like the worst kind of sexual innuendo?

Anyway I thought a house was a place to live in-not a vehicle for financial speculation- at least that used to be the case.

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Why does the phrase 'under performing' read like the worst kind of sexual innuendo?

Anyway I thought a house was a place to live in-not a vehicle for financial speculation- at least that used to be the case.

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I am sure the trend line assumes infinite growth. I wonder what the trend line for Japan looks like?

Whilst I am talking about Japan, that seems to be the model that advanced economies follow. They grow, reach saturation point and then stop growing.

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I am sure the trend line assumes infinite growth. I wonder what the trend line for Japan looks like?

Whilst I am talking about Japan, that seems to be the model that advanced economies follow. They grow, reach saturation point and then stop growing.

No it isn't

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Nationwide trend line of 2.8% above RPI over the 38.5 years of data, extrapolated a similar distance into the future means from the Q3 2013 trend price of £197141 we get a 'fair value' on trend at 2050 of:

£197141 x (1.028)^38.5 = £540k by 2050. This is in today's Sterling.

If wages keep pace with RPI(!) people will be paying these prices with todays wages. ie £25k person average or £37k household paying average property prices of 21 times single or 14 times joint income.

It's obvious nonsense yet makes it onto the media continually.

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That chart is the same as the one in the Nationwide monthly report (apart from presentation), but unlike Nationwide they've labelled it ambiguously. They make it look as if the trend line is showing inflation over time rather than the trend of the inflation-adjusted Nationwide series.

Someone casually looking at it might conclude that house prices aren't keeping up with inflation.

Anyway, the whole thing is a load of bollux as we already know.

Here's a chart of the real FTSE 100 index (deflated by RPI) at the end of 2002 with trend added. Poor old Footsie, it was badly underperforming. Fill yer boots!

FTSE_trend_a.gif

Wind on over a decade and here's the chart with the 1984 - 2002 exponential trend projected forward:

FTSE_trend_b.gif

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  • 405 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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