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Smurf1976

Housing Statistics

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There's been plenty of discussion on this forum and elsewhere about the accuracy of the various property market statistics.

Here's and example of how it's working right now. In Melbourne, the bottom of the market is falling significantly whilst the top continues to rise. Since a $3 million house selling has far more impact on the mean average than a $200,000 house it doesn't need to many sales at higher prices at the upper end of the market to not only offest the falls at the lower end, but produce a result which says that average prices are rising.

And that's exactly what's happening. As long as the top is booming that drags up the average and makes the statistics look positive. As I have said on various occasions, to make use of the price data you need to know the QUALITY of what is being sold. A shift in the relative portions of entry level flats versus mansions (or anything in between) will skew the data.

It's like comparing the price of cars. If there's a major shift in relative sales volumes so that less top of the range Rolls Royce cars are selling and more small 4 cylinders then of course the average price will go down. That is true even if the actual price of every single car being sold went up. Likewise if the relative share of FTB's declines whilst the top of the market continues to do well then average house selling prices will go up even if the actual selling price of the SAME house went down. So you need to know WHAT is being sold, not just how much is being paid for it. All cars are not alike and neither are all properties. There are marked differences in price and quality in both cases.

For most people it is the lower and middle price properties that are of interest. These are the ones which seem to be falling in price but this is hidden by a strong market at the top end.

http://www.theage.com.au/news/national/hig...0670303229.html

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So how do we kill the market at the top? Go out in a dufell coat at midnight with a large bag of rats?

Who cares what the top of the market is doing? Who cares if the stats reflect reality?

As soon as ordinary people can afford a house, the nightmare is over. That is all that matters.

P.s. I think I could happily rent long-term, definitely so if there was longer security of tenure in the UK.

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Who cares what the top of the market is doing? Who cares if the stats reflect reality?

As soon as ordinary people can afford a house, the nightmare is over. That is all that matters.

P.s. I think I could happily rent long-term, definitely so if there was longer security of tenure in the UK.

Well in a sense, as a drop out I don't care anymore. Since I haven't had security of tenure for the past 7 years, I'm not even looking to want it anymore!

...but on a broader level, I would suggest that the stats feed into people's expectations of what they can expect to pay. While they are skewed upwards, the expectation that will then be reflected in the offer, is that houses are worth more. The nightmare is generated by ideas, and ideas are generated by scientific sounding things like stats.

Your right, in "as soon as ordinary people can afford a house"... but I think that the hyper-reality of stats is a significant ramping mechanism to make sure that they can't. Its all about confidence and about what people that don't frequent this site THINK they know about house prices.

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Its all about [...] what people that don't frequent this site THINK they know about house prices.

Nail, head. Head, nail. "Pleased to meet you!" "You too!"

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How long will it be before the average person in this country of morons actually realises that:

1) Rising house prices benefit very few people

2) Rising house prices don't make you wealthier, it just allows banks to lend you more secured on your house

I expect that house prices will fall at about the same point as people realise that HPI is hurting them.

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I expect that house prices will fall at about the same point as people realise that HPI is hurting them.

But I bought my house for £80k and now it's worth twice that! With the profit I made I was able to remortgage and buy a lovely new SUV. How can HPI be bad? :P

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But I bought my house for £80k and now it's worth twice that! With the profit I made I was able to remortgage and buy a lovely new SUV. How can HPI be bad? :P

Because it's actually a loss. The "step up the ladder" to the larger house is further away than ever. And the SUV was bought with debt just like if you took out a car loan, only this way you pay it off over a longer period and pay more interest.

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Because it's actually a loss. The "step up the ladder" to the larger house is further away than ever. And the SUV was bought with debt just like if you took out a car loan, only this way you pay it off over a longer period and pay more interest.

And your home is at risk if you don't keep up repayments (on your SUV :P )

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Who cares what the top of the market is doing? Who cares if the stats reflect reality?

As soon as ordinary people can afford a house, the nightmare is over. That is all that matters.

P.s. I think I could happily rent long-term, definitely so if there was longer security of tenure in the UK.

Some people believe that in order to make the bottom end look better the only answer is to drag the top end down to the same level ;)

Levelling-down would have no impact on the wider market, it would just make the stats appear 'better'.

Edited by BuyingBear

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Some people believe that in order to make the bottom end look better the only answer is to drag the top end down to the same level ;)

Levelling-down would have no impact on the wider market, it would just make the stats appear 'better'.

I SO SO don't agree. The overall stats have an indicative effect on what people expect to pay and think is reasonable to pay at every level, and I would conjecture more so the bottom. If I think I can get an 'average' house for 180 I am less than likely to be satisfied with a 1 bedroom flat for the same price, however if the average is 204 then I might just go to 180 in desperation, and I think this tends to be far more reflected in bottom end thinking than top end thinking, because that is where the real squeeze has been put on. Its not the people who can bag an 800K house that are suffering. Lets face it, if I have 800K to spend I am going to get something that is pretty close to my perfect model (well for me, more than). I could probably drop 200K from what I am spending and still get what for me is a palace. But too many of those 800K houses will disproprotionately affect the averages.

EDIT:

What I am arguing is not that the stats mean anything unto themselves but that they mean something to peoples economic psyche. This is about how rubber 'stats' presented as reality affect perception which in turn affects concrete offers.

Edited by Elizabeth

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In the US practically all the house price indices are based on the median, which is of course unaffected by outliers. Here we have about 6 different indices but AFAIK they are all based on the mean.

Why?

frugalista

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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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