Wednesday, August 3, 2011

Chart of the day - long run house price comparison

Many thanks to Chris Joye for putting in the leg work to produce the below graph and associated analysis.  I recommend reading Joye's analysis before drawing any conclusions.


  1. Is one to assume this is your subtle poke at Mr. Joye's not so subtle use of logarithmic scales on the y-axis?

    CAGR of 'only' 2.5% results in a real house price growth of 2.4x over the 36 years. Taking 0.6% off that growth rate for capital improvements still results in real home prices 2x higher...

  2. To be honest, I thought for all that effort to produce the data, there are much better ways of presenting it, and a far more robust explanation than the one given.

    Why use a log scale for real prices, then squish all that data into the centre? To diminish the visual impression of the difference?

    Also, since when is 0.9%pa in real terms over 3 decades referred to as 'only' - implying it is a small difference? And why then discuss inflation differences when the measure are inflation adjusted?

    And why not discuss the mortgage interest rate differential between Aus and the US, which is the argument used to suggest that the great surge in Aussie home prices at the turn of the millenium was totally expected and a once-of adjustment?

    Then why write a report to the Prime Minister in 2003 showing how unaffordable housing is, when from the graph recently produced (link below), it is clear that household had more disposable income in 2003 than the mid 1990s? (that would be consistent with the arguments about why households are so much better off in 2011).

    So maybe it was subtle, but now it's not.