The inevitable fall in house prices will cost us dear

Thrugelmir

Graham_Devon wrote: »

You got your sums wrong.

Q4 1994 - £62,066
Q4 2004 - £161,288

Percentage change per year = 15.99%

An average annual growth rate of 9.95% would put prices in 2004 at around £126,000

Standard of maths these days is appalling.....

You've overlooked the issue of compounding.

Graham_Devon

Thrugelmir wrote: »

Standard of maths these days is appalling.....

You've overlooked the issue of compounding.

Why would you compound an average growth rate?

Loughton_Monkey

Graham_Devon wrote: »

You got your sums wrong.

Q4 1994 - £62,066
Q4 2004 - £161,288

Percentage change per year = 15.99%

An average annual growth rate of 9.95% would put prices in 2004 at around £126,000

Must have gone to the wrong school.....

1995: £62,066 for one year at 15.99% is £71,990
1996: £71,990 for another year at 15.99% is £83,502
1997: £83,502 for another year at 15.99% is £96,854
1998: £96,854 for another year at 15.99% is £112,340
1999: £112,340 for another year at 15.99% is £130,304
2000: £130,304 for another year at 15.99% is £151,139
2001: £151,139 for another year at 15.99% is £175,306
2002: £175,306 for another year at 15.99% is £203,337
2003: £203,337 for another year at 15.99% is £235,852
2004: £235,852 for another year at 15.99% is £273,564

Or should I write to Microsoft to report a bug in Excel?

Let me know if you want a similar calculation at 9.95%. It would come to around £161,000.

Loughton_Monkey

Graham_Devon wrote: »

Why would you compound an average growth rate?

Because I don't know how the hell it can be an average growth rate if it isn't compounded!


Phewwwww......................

chewmylegoff

Graham_Devon wrote: »

Why would you compound an average growth rate?

Where is that double face palm graphic.

Graham_Devon

In accounting, would you compound profit to come up with an average profit growth rate over the previous, say, 3 years?

I understand compounding, but don't understand why you would do so when looking at the average growth rate over a set period.

Were not talking about the average yearly rate of HPI here, which is what Loughton has worked out. Were talking about the average growth rate over a set period. I don't think I'm digging a hole here, as I've seen it expressed this way on numerous financials. And indeed, David Blanchflower has taken the same route.

chewmylegoff

Yes. Because accounting uses the same maths as everything else.

Graham_Devon

Fair enough. I'm wrong then.

As is Blanchflower.

As is our accountant who expressed our average profit rate over the last 3 years.

ukcarper

Graham_Devon wrote: »

Fair enough. I'm wrong then.

As is Blanchflower.

As is our accountant who expressed our average profit rate over the last 3 years.

Profit is a different thing to increase in price

Loughton_Monkey

Graham_Devon wrote: »

Fair enough. I'm wrong then.

Goats & Monkeys Graham....

Would you seriously invest £10,000 in a 3 years Savings Bond at 5% annual interest, and happily walk in three years later to collect £11,500 maturity money?

Graham_Devon wrote: »

As is Blanchflower.

It may help in the future if you learn that an awful lot of journalists cannot be trusted and often get things totally wrong. Raving left-wing journalists are even worse.

Graham_Devon wrote: »

As is our accountant who expressed our average profit rate over the last 3 years.

No. He's very probably right. Making you wrong.

Compound growth rates = chalk
Average profit rate = cheese

A profit rate could be profit as % of turnover. It's a totally different turnover each year, so I don't know how you could compound it without being meaningless.