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(Edit: I'm not an economist by training and I've realised Im not really sure about any of this, so maybe ignore everything after this paragraph. But certainly,

(Edit: I'm not an economist by training and I've realised Im not really sure about any of this, so maybe ignore everything after this paragraph. But certainly, here in the UK, house prices have more than doubled in the last 30 years after adjusting their prices for inflation, so inflation is nowhere near the whole picture.) It is included but at a very different proportion from its actual impact on consumers. For example, the UK standard inflation index, CPI, includes the following items in its measure (as of 2017 [1]): 04.1 Actual rentals for housing: 5.6% 04.2 Owner occupiers' housing costs: 17.4% (Also, I'm not sure whether "Owner occupiers' housing costs" only includes mortgage repayments, but that's the closest thing I could see on the list. And the way it's phrased in that list, with the word "actual rentals", makes it sound like price increases won't necessarily be reflected in the index so long as everyone were to downsize correspondingly - but I'm not clear about that one.) It's like that because inflation is meant to reflect a very different concept than we're talking about here. We're talking about something becoming intrinsically more valuable (in this case, because of scarcity). Inflation is meant to judge when a currency has less intrisic value. So if a house price goes up by 100% but that's because it's twice as valuable, then in some sense the inflation there is 0%. [1] https://www.ons.gov.uk/economy/inflationandpriceindices/articles/consumerpriceindicesabriefguide/2017#whats-in-the-basket https://www.ons.gov.uk/economy/inflationandpriceindices/arti...

tremon 6y ago
I'm not sure whether "Owner occupiers' housing costs" only includes mortgage repayments If it's similar to the situation in NL, those housing costs includes things like municipal taxes and local services (water, sewage, electricity), parts of which are billable to the registered owner of the property, not the inhabitant. And since the central government has been outsourcing more and more responsibilities to local government, these local taxes have increased massively to pay for things that were hereto paid out of the national tax budget. So if a house price goes up by 100% but that's because it's twice as valuable Not likely. Many studies have shown that in scarcity, house prices don't follow the value of the property, but the budget of the buyers. The increase in housing prices is more due to the ease of access to mortgages (low interest rates, tax bonuses, etc) than due to value increases of the property.

tremon 6y ago

I'm not sure whether "Owner occupiers' housing costs" only includes mortgage repayments If it's similar to the situation in NL, those housing costs includes things like municipal taxes and local services (water, sewage, electricity), parts of which are billable to the registered owner of the property, not the inhabitant. And since the central government has been outsourcing more and more responsibilities to local government, these local taxes have increased massively to pay for things that were hereto paid out of the national tax budget. So if a house price goes up by 100% but that's because it's twice as valuable Not likely. Many studies have shown that in scarcity, house prices don't follow the value of the property, but the budget of the buyers. The increase in housing prices is more due to the ease of access to mortgages (low interest rates, tax bonuses, etc) than due to value increases of the property.