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How Much Of Hpi Is Down To Improvements?

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Wondered this for a while. When the HPI stats are released there is no account taken for the changing nature of the house, ie it is assumed that like upon like houses have all increased in price.

I wonder how much of HPI can be accounted for by actual real improvements to houses, clearly some maintenance is required to keep the value constant but I am sure lots of people actually improve their houses over time, be it extensions or whatever.

This istn't really a bear/bull argument (you could probably argue it both ways), just wondering.

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Wondered this for a while. When the HPI stats are released there is no account taken for the changing nature of the house, ie it is assumed that like upon like houses have all increased in price.

I wonder how much of HPI can be accounted for by actual real improvements to houses, clearly some maintenance is required to keep the value constant but I am sure lots of people actually improve their houses over time, be it extensions or whatever.

This istn't really a bear/bull argument (you could probably argue it both ways), just wondering.

Good point! It would be interesting to see an index of house prices corrected against improvement expenses (bit of a survey/research nightmare I admit!)

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Ruin a renovators day. When inspecting the property mutter to your significant other "Don't worry. We will just knock the whole thing down and build something decent"

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Wondered this for a while. When the HPI stats are released there is no account taken for the changing nature of the house, ie it is assumed that like upon like houses have all increased in price.

I wonder how much of HPI can be accounted for by actual real improvements to houses, clearly some maintenance is required to keep the value constant but I am sure lots of people actually improve their houses over time, be it extensions or whatever.

This istn't really a bear/bull argument (you could probably argue it both ways), just wondering.

HPI is definately affected by inprovements. Regardless of opinions of DIY shows on TV, people are now far more cautious about their homes than in the past.

An extension for an extra bed or larger kitchen is far cheaper than buying a larger property. And it would be worth far more when it is sold.

I've argued ever since joining that there are bargains out there that need renovating. BUt the avid bears are still waitng for a crash so that they can buy an overpriced refurbished property or a plush new build :blink:

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Wondered this for a while. When the HPI stats are released there is no account taken for the changing nature of the house, ie it is assumed that like upon like houses have all increased in price.

I wonder how much of HPI can be accounted for by actual real improvements to houses, clearly some maintenance is required to keep the value constant but I am sure lots of people actually improve their houses over time, be it extensions or whatever.

This istn't really a bear/bull argument (you could probably argue it both ways), just wondering.

Some indices, such as the Halifax are supposedly based not on prices of individual houses but on abstractions of houses - ie 4 bedrooms, 2 bathrooms etc. (that of course makes them very difficult to verify). If this is the case in theory these factors should be accounted for, although I would suggest research is needed to see how current their database is.

Other indices do not take account of such changes is category, so here, HPI may well be nothing more than "improvement".

As you say, the question is NOT bear or bull. For example, a bear might baulk at the idea that all this HPI is in some way "justified" by improvement. That would be may stance: there is no reason why a couple willing to live in a 2 bed house should have to pay more just to live in a house with an extra bedroom they don't need, just because all the 2 beds have been "improved" to 3. This is nothing more than overspecification - something we are rather fond of and currently willing to pay for - but for how long? Furthermore, the plot has not increased in size and neither has its location. These for me should be considered the real determinants of value.

Having said that we can make a logical argument for why BTL has distorted the market here.

As a homeowner, you would probably value a bigger garden and larger rooms. A a BTLer, one would value cramming 'em in, as this, given enough takers (and that is critical) increases your yield.

This may all seem like great bull arguments for property, until you look at the capital cost of these developments. Now imagine sticking that money in the bank. Now add 20 years. How big is the number :

Profit_less_costs = £developed_house_pft_20_yr - (£development_cost + £interest_on_development_costs_20_yrs)

.... maybe a good deal less than many bulls suppose, ESPECIALLY when those development costs have been incurred at a time when building labour costs (plumbing / plastering / sparkeying / chippying / tyling / brickying ) are inflated.

And then you have to wonder what all this unit / plot subdivision / letting is doing to the standing of neighbourhoods. There can be little doubt that a proponderance of rental properties in any area has a negative effect on capital values. So while garden-grabbers and bedroom adders may be pushing up their yields, what is happening to the expected future capital values? With after costs rental profits being so thin, one really has to wonder how th efigures are going to stack up, EVEN without a significant correction (which is, of course an argument for a significant correction).

I too would be interested in any quantitative assessments in this regard.

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It's a good point, which needs making periodically.

Another aspect is impact on the govt's house-building stats.

When house-prices (and costs and stamp duty) are high, more people will extend rather than move. This adds a huge amount of living space to the country's housing stock, one room at a time (eg loft conversions, garage conversions, rear extensions, conservatories). I think the govt is underestimating just how much housing stock is being added by this method, and probably overestimating the need for extra house-building as a consequence.

Similarly, although the number of households is increasing, due to people divorcing, living alone etc, the size of housing unit required for these smaller households is shrinking. Lots of houses get converted into flats to cater for this demand, but I wonder if govt stats pick this up?

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I don't think maintenance should be taken into account, else house prices would be falling in a static market. However, they should provide a statistic saying around 1% (or whatever) of the house value needs to be spent on home maintenace.

Edit: While improvements, should be taken into account. I.e. increasing the number of bedrooms puts the house value into a different category.

Edited by Jason

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I wonder how much of HPI can be accounted for by actual real improvements to houses...

Probably all of it, especially as both the magnolia paint and laminate flooring markets are going through the roof - a real investment

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  • 333 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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