The property boom

PoorDave

Generali wrote:

You want it? You got it. 7 year return from the starting year shown on the left:

1983.........52.96%
1984.........40.89%
1985.........23.67%
1986.........12.33%
1987.........-0.50%
1988.........-18.00%
1989.........-31.20%
1990.........-21.93%
1991.........-14.59%
1992.........-3.62%
1993.........10.25%
1994.........17.64%
1995.........41.27%
1996.........70.17%
1997.........93.17%
1998.........94.73%

That's total return, not annualised.

As 'normal' real stock market returns are 7%, you'd need 60.58% to beat that.

I think this shows what we sort of expected - the doubling every 7 years is garbage if you consider actual data.

Although we're basing that on some lady mathematician, apparently...

Generali

PoorDave wrote:

I think this shows what we sort of expected - the doubling every 7 years is garbage if you consider actual data.

Although we're basing that on some lady mathematician, apparently...

If it's the same woman I'm thinking of, she's a (former) maths teacher rather than a mathematician as such. I hope she's done the sums on leverage on the amplification of returns the way down as well as the way up.

mystic_trev

Thanks Generali, interesting to see figures expressed like that.If you believe each boom and bust cycle is larger than the last we could be due for an almighty correction - on the other hand perhaps it really is "different this time"

Generali

I'm not really a great believer in cycles and all that - I think each asset bubble sits alone. However, we have experienced a massive bubble this time which implies a similarly huge bust once money supply stops increasing as quickly as at present.

I'll try to get the figures annualised if I have time today, unless someone else can do the reverse compound interest thingy.

RufusFrog_2

franklee wrote:

Please don't tell any of my account managers that, so far I've fooled them that the profit from selling my last house is real money. Heck, I need the income it generates for paying the rent so don't tell my landlord that either, I don't think he'd take kindly to being paid in interest from 'virtual' money :rotfl: :rotfl: :rotfl: :rotfl: :rotfl:

Obviously once you take the profit, and start employing it to do something else, it becomes real. Ours is just moving on to the next house - I've never held it in my sticky fingers (or even bank account) so don't really believe in it, and if property prices halve in real terms I will have lost nothing (as I need somewhere to live and all the other property I might buy would be similarly devalued).

I assume you believe house prices are going to tumble, and have taken your money out of bricks and mortar and put it somewhere else with the intention of buying back in at the bottom of the market and making a huge profit? Well good luck to you. But I'd rather have a nice place to live that I control and can alter with no landlords or management agents to p*ss me around and not have to bet on the future direction of the market. And I don't really care about getting rich. (Unbelievable, I know.)

Generali

RufusFrog wrote:

I assume you believe house prices are going to tumble, and have taken your money out of bricks and mortar and put it somewhere else with the intention of buying back in at the bottom of the market and making a huge profit? Well good luck to you. But I'd rather have a nice place to live that I control and can alter with no landlords or management agents to p*ss me around and not have to bet on the future direction of the market. And I don't really care about getting rich. (Unbelievable, I know.)

I think the only homeowners that get rich out of HPI are those that borrow against the value of their homes and invest the money in something productive (e.g. starting their own business). For the majority, it is my belief that high prices for houses just keep 'em in the rat race.