cross-posted from: https://lemmy.world/post/19930828
this post was submitted on 22 Sep 2024
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Inflation however is a load of bollocks. It's inaccurate to measure and can be oh so easily manipulated.
House prices have been rising at a stupid rate for decades yet we had in the UK a typical inflation rate of... 0.1% for a decade whilst house prices out performed everything else because they just ignore it.
Like how if your favourite brand of cereal goes up 700%, that won't be included in inflation data they make the assumption you'd eat a generic brand instead that only went up 0.5%
It's all bollocks the lot of it, remove money it's not worth anything anyway
You need to look at the rent for the cost of housing. That's what goes into inflation. House prices are high because inflation is low. Or more correctly, they are high because interest rates are low, which is because inflation is low.
Imagine you have a rock-solid investment opportunity. You are sure, it will generate a return of 10k until the next year. Say you can borrow money for 5%pa. If you borrow and invest 100k, you get 110k back and have to pay 105k back, for a profit of GBP 5k. But if everyone thinks the same, they are not just going to let you have free money. If they can't adjust the payout, they will adjust the price. So, at that rate of interest, the price has to be 200k for that 10k opportunity.
The point is that if rents are constant while interest rates go down, then the cost of buying must go up.