Very basic pension advice..... absolute beginner!

robatwork

Secret2ndAccount said:

robatwork said:

I've always made an assumption that broadly speaking UK property prices reflect UK investment interest. That is, if I have a house in the UK, its value will over the long term go up or down roughly the same as the FTSE.  Obviously this depends on factors like location and which FTSE index, and happy for my assumption to be proved disastrous.

My point is that if you have a house here then you are already "invested" in the UK, given you're prepared to downsize and release equity. So a higher exposure to worldwide markets is sensible in your position.

Whilst there is some correlation, I don't think the link is strong. Obviously in a recession, everyone is poor - house prices and shares go down. In a boom, both go up. But that's about the end of it.

There is constant government intervention in both markets. They give a stamp duty holiday; that messes with house prices. Then they do quantitative easing, which affects the markets. They force down interest rates. Maybe a bit of correlation there as they force savers to go into risk investments, pushing up share prices. At the same time, mortgages get cheaper, so house prices rise.

The same house in London vs Lancashire can vary in price by a factor of 10. This doesn't apply to shares.

If business becomes more efficient, share prices go up. There is virtually no effect on house prices.

If the pound falls (or rises) in value, the effect on stock markets is significant; on house prices not so much.

I looked for a graph and failed to find one but glad you did.  This certainly shows a correlation, and a statistician could say whether it's strong or weak - definitely from 2003 it shows a pretty similar trend. I was trying to find one that went back to the 1970s. I did mention location as a prime factor, but both have "bubbles" that can burst, and I still stand by my point.

Secret2ndAccount

If, by correlated, you mean they both go up over the long term, then yes, they are correlated. But no, they are not usefully correlated. You can't pick out one 5 yr period where they travel together and say that makes them correlated.

From 1991 - 2000 one is up 50%, the other is up 200%

From 2000 - 2010 one is up 150%, the other is down 50%

In 2011-2014 they traveled in opposite directions - when one went up, the other went down

2010 - 2020 three significant stock market falls, and house prices ran much smoother.

When two sequences are well correlated there's a simple formula that will get you from one sequence to a good estimate of the other. No such formula exists here.