Data Change May Show Uk House Prices Slightly Dear To Rents

[Digsby]

http://www.mindfulmoney.co.uk/wp/simon-ward/data-change-may-show-uk-house-prices-slightly-dear-to-rents/

The first thing that throws doubts into this as a measure of housing price value for me is the fact that the charts indicate that houses were getting cheaper from about 2005 onwards because the yield is increasing.

So they were fair value in about 2000, and then became progressively over-valued to 2005, and then started to become less over-valued from then until about 2009, at which point they started to get more expensive again.

In 2007 the rate at which they were becoming better value slowed until in 2008 when they represented fair value, yet in 2008 we had a whole year of price deflation, and yet the charts show barely a blip. How can a 30% drop in prices over the course of a year have no effect on the rate at which they are approaching fair value? I would be expecting an increase in the rate.

The second chart after the new methodology at least shows a visible difference during 2008, but it is a slowdown in the rate rather than an increase, so that still doesn't add up for me.

Apart from that, there is the fact that a change in imputed rent estimate methodology has made such a large difference in 2014, from 5% undervalued to 3% overvalued.

I'd be interested to hear if anybody has any views on this.

[zugzwang]

http://www.mindfulmoney.co.uk/wp/simon-ward/data-change-may-show-uk-house-prices-slightly-dear-to-rents/

The first thing that throws doubts into this as a measure of housing price value for me is the fact that the charts indicate that houses were getting cheaper from about 2005 onwards because the yield is increasing.

So they were fair value in about 2000, and then became progressively over-valued to 2005, and then started to become less over-valued from then until about 2009, at which point they started to get more expensive again.

In 2007 the rate at which they were becoming better value slowed until in 2008 when they represented fair value, yet in 2008 we had a whole year of price deflation, and yet the charts show barely a blip. How can a 30% drop in prices over the course of a year have no effect on the rate at which they are approaching fair value? I would be expecting an increase in the rate.

The second chart after the new methodology at least shows a visible difference during 2008, but it is a slowdown in the rate rather than an increase, so that still doesn't add up for me.

Apart from that, there is the fact that a change in imputed rent estimate methodology has made such a large difference in 2014, from 5% undervalued to 3% overvalued.

I'd be interested to hear if anybody has any views on this.

I think it works something like this:

Lower rental growth = smaller GDP deflator = magically higher real GDP print.

Magically higher real GDP print = magical reduction in annual (primary) deficits + higher growth = success for Osborne's bogus austerity!

We shouldn't be surprised at the sleight-of-hand. After all, this is a govt that's taken to incorporating the output of drug dealers and prostitutes to maintain a false narrative of economic recovereh.