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'8% Per Annum Lr Average'

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Just seen the latest press release from HBOS, which includes, as it's opening paragraph:

• The housing market is expected to be flat in 2006 with modest nominal house price growth and no change in real terms. UK house prices are forecast to rise by 3%, broadly in line with the predicted rise in retail price inflation. House prices have risen by less than the long-term average (8% per annum) in 2005 for the first time since 2000. Growth is expected to remain below the long-term average for the second successive year in 2006.

How on earth do they calculate a long-term average growth rate in the housing market of 8%? This is so spurious as to be contemptible.

Can we complain?

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Just seen the latest press release from HBOS, which includes, as it's opening paragraph:

• The housing market is expected to be flat in 2006 with modest nominal house price growth and no change in real terms. UK house prices are forecast to rise by 3%, broadly in line with the predicted rise in retail price inflation. House prices have risen by less than the long-term average (8% per annum) in 2005 for the first time since 2000. Growth is expected to remain below the long-term average for the second successive year in 2006.

How on earth do they calculate a long-term average growth rate in the housing market of 8%? This is so spurious as to be contemptible.

Can we complain?

What is the long term average inflation rate over the same period? What is the long term wage inflation over the same period? What is the average increase in stock market investments over the same period? Gold? Etc. Is retail inflation also expected to be below the long term average? Is stock market growth expected to be below the long term average?

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I think the problem is that they've failed to define what period the've used to define long-term. When measuring GDP, for example, long-term averages are usually measured peak-to-peak or trough-to-trough. Assuming we are now at a peak, that means they ought to look at compare current prices with (say) 1989, and look at the average percentage rise over the last 16 years. If they take just the last ten years, say, then they are getting a very distorted view.

I wonder what period they must have used to generate this 8% figure?

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Long run average growth should be in line with earnings growth, about 3% in real terms.

8% can only be in nominal terms and cover a period of high inflation, more "spin" bordering on an outright lie.

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From some old data I have, for "modern houses" the annual average rate house price inflation was 8.8%, from 1974 to 1994. Don't put down data jsut because you disagree with it.

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From some old data I have, for "modern houses" the annual average rate house price inflation was 8.8%, from 1974 to 1994. Don't put down data jsut because you disagree with it.

... and what was the annual average wage inflation in that period?

Edited by doogie

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Was it adjusted for inflation?

No, it is the house price inflation. If you want to compare it with another measure of inflation, then choose your measure of inflation. HBOS didn't say they were comparing the price of houses against the price of Mars Bars or holidays to Spain or any other product. They said it like it is. If you want to make it more complicated than it is, feel free, but don't get all upset when people report things correctly.

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Just got some data on average wages from 1970 - 2003 from the office of national statistics showing an average anual wage increase of 9.2%. Fancy interpretting this and coming to some sort of conclusion?

Edit (and 7.2% for RPI inflation over the same period)

Edited by Imp

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Just got some data on average wages from 1970 - 2003 from the office of national statistics showing an average anual wage increase of 9.2%. Fancy interpretting this and coming to some sort of conclusion?

How about this...

Historically, there is a close correlation between house prices and wage levels. House prices sometimes rise faster than wage levels, but when they do they always correct back to the long-term trend in the end.

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How about this...

Historically, there is a close correlation between house prices and wage levels. House prices sometimes rise faster than wage levels, but when they do they always correct back to the long-term trend in the end.

couldn't have put it better myself!

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  • 301 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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