Stats Inflation - why doesn't it include house prices

To post in this sub-forum you must have made 100 posts or have Trust status or have completed our ID Verification

Forums › Politics › Stats Inflation - why doesn't it include house prices

Eitsop

584 posts

Ultimate Geek
+1 received by user: 153

ID Verified

#288636 14-Jul-2021 11:23

In the 1970's US left out oil as part of inflation measures.. and that was a bad mistake..

Inflation is inherantly bad for people and the economy, as most know from 70/80's when interest was 10-20%

While house price inflation is good for those with property.

What it also does its increase cost of providing goods and services.. as the property they operate from they have to pay more for rent. And sometimes they defer employee pay increases due to rent increases

My question is.. why doesn't Stats NZ include house price inflation as part of their measures?

ezbee

2651 posts

Uber Geek
+1 received by user: 3089

#2744246 14-Jul-2021 19:24

Yep its flat out nuts as accommodation costs are a major part of your living budget.
No matter if you are paying by way of rent or mortgage.

Oh an never mind the commentators you get on radio pitching the line that housing costs won't effect rents.
Spots bracketed by property investment advertisements, and they will get you to review is the yield on value of property to set rent target.

Its handy for a Reserve Bank Governor and senior staff incentivized on reeling in inflation, to have the biggest expense in anyone's life out of the frame.

Certainly its a question one would like to hear a range of economists review why this is smart or dumb.

So we have a Reserve Bank that has no 'interest' in reeling in true cost of living.
Recently telling Government to stuff its request to consider Housing costs.

You have cheap flat screen TVs why do you need a house to put it in.

gzt

18679 posts

Uber Geek
+1 received by user: 7820

Lifetime subscriber

#2744313 14-Jul-2021 23:31

Yes, rent and new house construction are included in CPI which is a measure of inflation:

https://www.stats.govt.nz/news/housing-costs-push-up-annual-inflation

gzt

18679 posts

Uber Geek
+1 received by user: 7820

Lifetime subscriber

#2744314 14-Jul-2021 23:34

Getting back to the other question - I can think of scenarios where the market value has increased over several years and the rent does not increase in proportion. There's a relationship as you say and I agree. In practice there are a complex number of factors in the relationship and in the composition of house price itself making house price increase an unpredictable indicator for anything else.

Eitsop

584 posts

Ultimate Geek
+1 received by user: 153

ID Verified

#2744415 15-Jul-2021 09:56

gzt: Yes, rent and new house construction are included in CPI which is a measure of inflation:
https://www.stats.govt.nz/news/housing-costs-push-up-annual-inflation

Its probably land prices then, that are not in the inflation measure?

ezbee

2651 posts

Uber Geek
+1 received by user: 3089

#2744684 15-Jul-2021 16:38

GZT Thanks for the clarification on the measures.
Suppose I got the wrong impression from a recent interview of an economist.
Perhaps really meaning the current measure miss a part of inflation for a sector of population.

Inflation of house prices hits the next generation buying a house, or a new rental at new market rate.
Those in old property, so their costs were years ago, and old rental where increase may only be incremental if landlord is keep to keep the tenant... see a different picture.

So a two speed economy,
However it does look like we miss all the burden of putting a roof over your head for everyone.

GV27

5977 posts

Uber Geek
+1 received by user: 4212

#2746213 18-Jul-2021 13:14

I think the issue you have to consider is whether the weighting of accommodation costs fairly reflects reality for industries where pay negotiations are driven by inflation figures.

I.e. the nurses settled for a small nationwide increase last time which was around about the RBNZ inflation rate. But that calculation assumes that a certain portion of their income goes on accommodation and living expenses - that's rent, insurances, etc and for many that portion is far higher, especially in Auckland/Wellington, where those salaries make outright home ownership much harder.

I think I worked out for accommodation weighting of the basket of goods to fair reflect the average Auckland rent alone, it was assuming you had a stonkingly high income to begin with.