FT - house prices versus equities

carolt

View of the Day: House prices

By Peter Tasker
Published: January 8 2009 15:19 | Last updated: January 8 2009 15:19

House prices in the UK and the US are historically high relative to equities - only in Japan is the price of both asset classes at multi-decade lows relative to GDP, says Peter Tasker, strategist at Dresdner Kleinwort.

He says a significant characteristic of the post-2000 housing bubbles that have been such a prominent feature of the global financial landscape is the lack of correlation with equity markets.

“While house prices doubled and trebled, equity markets, with the exception of the BRICs, barely poked their heads above the highs of 1999-2000,” he says. “Over the past twenty years the world has experienced serial bubbles in equities and housing - in contrast to Japan’s experience in the 1980s-90s of synchronised bubbling and de-bubbling.”

He says that while the de-bubbling process is more advanced in equities than in housing in the UK, US and Japan, in the latter country both the equity and housing markets are at multi-decade lows relative to nominal GDP.

In the UK, equities are at historical lows relative to nominal GDP but housing has yet to de-bubble, he says. US stock prices have fallen substantially relative to GDP, but are not as low in the historical range as the UK, let alone Japan. The housing correction, on the other hand, is more advanced than in the UK.

“Assuming that the long-term trend in the asset price/GDP ratio is flat, we would favour equities over housing in all three countries, though with the least conviction in the US.”


http://www.ft.com/cms/s/0/483c6414-dd91-11dd-930e-000077b07658.html?nclick_check=1

chucky

another thing to consider here is that some equities will perform better than others just as some local areas or even properties may increase/decrease in value more than others.

if we're looking at general numbers across a period of time it is very interesting as dividends should also be taken into account in favour of equities.

StevieJ

Yes I invest in equities and live in my house.

carolt

True chucky. Also equities have low maintenance costs compared to housing.

chucky

carolt wrote: »

True chucky. Also equities have low maintenance costs compared to housing.

what happens if you're renting - are we going to have to have that renting vs owning discussion now

PasturesNew

I'm not quite sure what the term equities refers to exactly ... and never seem to remember to look it up.

But, whatever they are, I'd be too nervous about buying any and not know where to start, to be honest.

That's why I have to stay in cash, because I understand it.

scousethife

I have no idea what an equity is, but I suspect it was invented by the people who invented mortgage back securities in which case I'd rather my money in a glass box in the middle of liverpool and and write on it 'please take me'

Really2

carolt wrote: »

View of the Day: House prices

By Peter Tasker
Published: January 8 2009 15:19 | Last updated: January 8 2009 15:19

House prices in the UK and the US are historically high relative to equities - only in Japan is the price of both asset classes at multi-decade lows relative to GDP, says Peter Tasker, strategist at Dresdner Kleinwort.

He says a significant characteristic of the post-2000 housing bubbles that have been such a prominent feature of the global financial landscape is the lack of correlation with equity markets.

“While house prices doubled and trebled, equity markets, with the exception of the BRICs, barely poked their heads above the highs of 1999-2000,” he says. “Over the past twenty years the world has experienced serial bubbles in equities and housing - in contrast to Japan’s experience in the 1980s-90s of synchronised bubbling and de-bubbling.”

He says that while the de-bubbling process is more advanced in equities than in housing in the UK, US and Japan, in the latter country both the equity and housing markets are at multi-decade lows relative to nominal GDP.

In the UK, equities are at historical lows relative to nominal GDP but housing has yet to de-bubble, he says. US stock prices have fallen substantially relative to GDP, but are not as low in the historical range as the UK, let alone Japan. The housing correction, on the other hand, is more advanced than in the UK.

“Assuming that the long-term trend in the asset price/GDP ratio is flat, we would favour equities over housing in all three countries, though with the least conviction in the US.”


http://www.ft.com/cms/s/0/483c6414-dd91-11dd-930e-000077b07658.html?nclick_check=1

So should we look at property as just an asset then and not a place to live?

mower5

Really2 wrote: »

So should we look at property as just an asset then and not a place to live?

The BTL bubble has been caused by this thinking. Mainly those baby boomers chasing a larger pension pot instead of traditional assets.

beingjdc

scousethife wrote: »

I have no idea what an equity is

It's a share.

I very rarely buy named shares, but I buy funds of shares, which spreads the risk a bit and allows someone else to manage them for me.

At the moment given the pitiful interest on cash but the up-and-down nature of the stock market, I'm getting into corporate bonds at a range of risk levels.

Long-dated Tesco bonds are yielding 6.3% fixed, which compares well to the 3.6% Tesco Bank offer. Now, admittedly you don't get your capital back if Tesco go bust, but...

StevieJ

beingjdc wrote: »

It's a share.

Or an actors union