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wsn03

House Prices to be included in inflation

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http://www.bbc.co.uk/news/business-37938896

I don't believe it....why now? Why now just as real house prices are stagnating or likely going into reverse? After all the damage done by removing them from the inflation figures, here is another way of subduing inflation, to keep interest rates low, to prop up the giant bubble.

Corbyn should be preparing his victory speech soon, and I'll look forward to a 5 year retirement on benefits...

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1 hour ago, wsn03 said:

http://www.bbc.co.uk/news/business-37938896

I don't believe it....why now? Why now just as real house prices are stagnating or likely going into reverse? After all the damage done by removing them from the inflation figures, here is another way of subduing inflation, to keep interest rates low, to prop up the giant bubble.

Corbyn should be preparing his victory speech soon, and I'll look forward to a 5 year retirement on benefits...

I am not sure that it does include house prices, it includes the costs to rent.

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I've stopped bothering with the ONS's nonsense, so I could be wrong on this, but I think they are including housing costs by calculating Owner Equivalent Rent, or some other made up figure, that is designed to not show any inflation.  The entire reason to change CPI was to harmonize it with the figures used in the rest of Europe, but then they've gone and chosen a housing figure that is at odds with how it's calculated in the rest of the EU (a straight-forward purchase price index).

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Quote

 

Although the Consumer Price Index does include the cost of renting and running a home, it leaves out special costs faced by property owners.

CPIH includes what are called the "costs of housing services associated with owning, maintaining and living in one's own home".

Rather than tracking the cost of a mortgage, statisticians estimate what it would cost homeowners to rent the property they live in.

There is also an element for what we pay in Council Tax.

 

Although all of those items are indirectly and to some extent influenced by house prices they don't seem to have much direct correlation with house prices.

For example house prices could go up 10% on average and not be fully reflected in the price of those items.

Edited by billybong

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Funny that now that prices have stalled or falling in real terms......whatever fits to create whatever the agenda they are playing for....statistics you can make them read whatever you want them to show, to pay the least as possible at any particular time...what was rpi linked to again.;)

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16 minutes ago, richc said:

I've stopped bothering with the ONS's nonsense, so I could be wrong on this, but I think they are including housing costs by calculating Owner Equivalent Rent, or some other made up figure, that is designed to not show any inflation.  The entire reason to change CPI was to harmonize it with the figures used in the rest of Europe, but then they've gone and chosen a housing figure that is at odds with how it's calculated in the rest of the EU (a straight-forward purchase price index).

I don't understand why the cost of housing is not included.  When the Bank of England became independent, they should have been given a house price target (same as RPI +/- 1 or 2)

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1 hour ago, wsn03 said:

I don't believe it....why now? Why now just as real house prices are stagnating or likely going into reverse?

The exclusion of housing/rent was done as a sneaky way to cheat the inflation figures and thus avoid having to increase interest rates.

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So what happens if house prices go negative and offset the price inflation of everything else due to a crashing pound? They can keep interest rates low pointing out that inflation is perfectly within the target?

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2 minutes ago, Northern Welsh Midlander said:

So what happens if house prices go negative and offset the price inflation of everything else due to a crashing pound? They can keep interest rates low pointing out that inflation is perfectly within the target?

Yes maintaining the inflation figure is the target regardless of real world inflation. Thats why house prices were taken out for so long when rising, now they will be used to counterbalance inflation due to weakening pound

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2 hours ago, wsn03 said:

http://www.bbc.co.uk/news/business-37938896

I don't believe it....why now? Why now just as real house prices are stagnating or likely going into reverse? After all the damage done by removing them from the inflation figures, here is another way of subduing inflation, to keep interest rates low, to prop up the giant bubble.

Corbyn should be preparing his victory speech soon, and I'll look forward to a 5 year retirement on benefits...

It's for the same reason why they did things like changing DVDs to Blu Ray players in the basket of goods ...

They have completely ignored years  (more than a decade) of raging house price inflation whilst telling the public that inflation was 'low' as a result of ignoring the elephant in the room - now they figure that prices are set to stabilise or fall so it's an opportune time to finally include them as it will result in downward pressure.

 

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Yes it's a fiddle, but good news because surely this means they know house prices will fall?

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if you read the article it doesn't say the price of housing will be included...it says the cost of owning a home will be included...who knows what guff they will make up to represent this.

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7 minutes ago, Frugal Git said:

Quite. Biggest sell signal in a long time.

Not necessarily. All that matters is that expected cpi > hpi. Both could still be positive.

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18 hours ago, richc said:

I've stopped bothering with the ONS's nonsense, so I could be wrong on this, but I think they are including housing costs by calculating Owner Equivalent Rent, or some other made up figure, that is designed to not show any inflation.  The entire reason to change CPI was to harmonize it with the figures used in the rest of Europe, but then they've gone and chosen a housing figure that is at odds with how it's calculated in the rest of the EU (a straight-forward purchase price index).

My blood boiled when I saw the headline but they've made it - funny that for them - really obscure and complicated, although who doesn't strongly suspect that the net effect will still be to suppress the inflation figure in the coming years?

"CPIH includes what are called the "costs of housing services associated with owning, maintaining and living in one's own home".

Rather than tracking the cost of a mortgage, statisticians estimate what it would cost homeowners to rent the property they live in."

So what are they comparing to what? Could understand if they compared this Owner Equivalent Rent to the cost of owning, which surely would have to include mortgage costs, and the difference between the owner equivalent rent and the owning costs is what was measured. Also

"There is also an element for what we pay in Council Tax." - how? Isn't ctax the same for whoever lives in a house? Why would that be included?

Can't see how the fiddle works but I'll eat my hat if it's not a fiddle.

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This pisses me off with everything that is wrong with the Government!!!!!!!!

They remove rental/mortgage costs from the inflation basket.. then let house prices double which would have shown marked inflation spike..

Oh lets remove them.. no inflation..

Now we are top of a bubble they re-introduce them.. just before the crash...

And you know what they will say.. House prices/rent going down.. what inflation are you talking about!!

Arrghhh.. you can never win with these self-serving spineless crooks..

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I'm not so sure they know/think house prices/rents are about to fall. Think about it as we stand CPI with housing included will be something like the RPI figure which does have housing included (so why not just use RPI doh!) The new CPI will rise.

That will lead to pressure for interest rate rises. When things finally crash the most they will able able to cut is 1 % or so. It will have zero effect. The crash is coming and it will be a big one. One day.....

Edited by bear.getting.old

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5 hours ago, bear.getting.old said:

That will lead to pressure for interest rate rises. When things finally crash the most they will able able to cut is 1 % or so. It will have zero effect. The crash is coming and it will be a big one. One day.....

Once there is a crash there will be all kinds of questions asked. The BOE can't rewrite history much though they like to, this is a simple tidying of their story. Not only is there nothing left to prop the market up with, there main level, interest rates, are under pressure. When finally they have to lift them it'll shatter the dream the indebted have been living in. That time is getting closer every day, the indebted know it and are soon to face reality. As the phrase goes, he who laughs last laughs longest.

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RE the council tax....seems a bit odd as I recall they took out the TV license as it started shooting up on the basis that by legal definitions it was a tax and therefore should be excluded from cpi.

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22 hours ago, North London Rent Girl said:

My blood boiled when I saw the headline but they've made it - funny that for them - really obscure and complicated, although who doesn't strongly suspect that the net effect will still be to suppress the inflation figure in the coming years?

"CPIH includes what are called the "costs of housing services associated with owning, maintaining and living in one's own home".

Rather than tracking the cost of a mortgage, statisticians estimate what it would cost homeowners to rent the property they live in."

So what are they comparing to what? Could understand if they compared this Owner Equivalent Rent to the cost of owning, which surely would have to include mortgage costs, and the difference between the owner equivalent rent and the owning costs is what was measured. Also

"There is also an element for what we pay in Council Tax." - how? Isn't ctax the same for whoever lives in a house? Why would that be included?

Can't see how the fiddle works but I'll eat my hat if it's not a fiddle.

I saw a good article on this subject posted on Twitter. This use of imputed rent is something of a scam to make it look like housing costs are being introduced when it is in fact a fake

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