What property price bubble?
Here’s what could turn out to be the Times’ first, interactive Flash-based, line chart graphic. (We knew the site was missing them.) We created it using a site called AmCharts, which lets you create a data and settings file that are then read and displayed by the clever folk at AmCharts. (You have to host a few other things, too.) This one uses property data from Nationwide dating back 35 years. With a bit of luck, we’ll soon have this and others available on the main site.
January 27, 2009
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14 Responses to “What property price bubble?”
Absolutely excellent.
Well done.
The information given is devoid of meaning unless inflation is removed, i.e also show “real” value over time as well.
Is this real or nominal prices? Looks like nominal pricing which tells you nothing
It would be best to show nominal gross personal incomes alongside house prices as it is thought that, long-term, such income determines house prices. This may be the best measure of whether prices are high or low at any given time.
Yes needs to be in real pricing.
Be useful need to compare some measure of real economic growth.
As Dave points out, Nominal prices tell you nothing. House prices are largely explained by average earnings (the average house in 1945 cost the same as the average house in 2002 by this metric. A chart is here:
http://www.housepricecrash.co.uk/forum/index.php?showtopic=102096
Your chart is misleading, particularly around the last peak in 1989.
Your chart uses data taken from the UK as a whole, if you did a chart for regions (South East, South West, East Anglia, London, West Mids, East Mids, North West, Yorks, North East, Wales and Scotland) a more volatile and scary picture would emerge.
Because house prices did not rise and fall uniformly throughout the UK. The rise and subsequent fall in prices was greatest south of the Severn/Wash line, it rose earlier and greater than events north of that line.
Does it make a difference ? Yes, it does. For example, that chart gives no indication that house prices in the South West and East Anglia rose rapidly then crashed by 30% and took a decade to recover, or that prices in Scotland rose very gently and hardly fell at all.
OK here’s the inflation data. Using ONS inflation table rp02, prices in 1993, after last bubble, should have risen by about 50% to take us to 2009 levels in order to keep pace with inflation. In other words prices need to come down to about £75,000 which makes sense in terms of income multiples etc. looks like a long way to fall from the current £179,000 then.
You may call them “clever folks” and boffins, but they have produced a meaningless graph as there is no price adjustment. It doesn’t matter if this house cost twice as many £10 notes to buy than it would have done 10 years ago unless we know how much that £10 note is worth in comparison with its earlier value. How much have earnings and inflation changed the value of that tenner since 1973? “Massively” is the answer.
In fact, the chart is more than meaningless — it’s actually misleading.
Don’t you think you all are being a little tough? Yes while inflation data CPI / RPI, BoE rates, earnings etc would be nice I hope the majority of us will be able to work out for ouselves that from 1996 / 2000 (the start of the current bubble) that inflation has overall been quite low and wage growth modest (bank bonuses notwithstanding).
Learn to think for yourselves…not have the Times do it do you.
Valuable graph which highlights how unsustainable current house prices are.
It would be very good to have another line on the graph which shows the average income or some measure of affordability (e.g 3.5 * average income) but I am sure that the average salary hasn’t doubled since 2000.
And where the Q4 figures?
I will give you a clue:
They are just about where the Q2 2004 dot is.
If you include those figures, that shows you which property price bubble.
The one that caused prices to go up far too high and broke the UK’s financial system.
ho Hum
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If James produced this report at one of my meeting, and gave the same reply, he would be looking for a new job. Everybody else is quite correct, a worse than useless chart. If this is typical of information given to manangement in order to make decisions, no wonder the country is in such a mess.
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