London

James Mackintosh

FT Alphaville today has a nice chart suggesting London house prices are down by more than a quarter in real terms.

Here’s an alternative thought: the quality of measurement of London house prices has collapsed. This chart shows London house prices after inflation as measured by LSL/Acadametrics, the Office for National Statistics, Nationwide, and the Halifax index Alphaville used. I used CPI, rather than the discredited RPI, for most of them, but showed the effects of both RPI and CPI for the Acadametrics series.

London housing indices

Halifax down at the bottom there is clearly out of line with the rest, although Nationwide’s index still shows a hefty real terms loss, of 9 per cent. Read more

James Mackintosh

John Authers, my predecessor as Short View writer and co-author of this blog, published some interesting graphs this week about London property, as he worries about a bubble.

I don’t often disagree with him, but on property I think he’s missing a trick. He pointed out that Miami’s housing bubble was far worse than London’s, but that London’s price rise is now approaching where Miami was:

London v Miami property since 2000, rebased

 

But these prices (rebased to January 2000) were in local currency terms. And London’s property market is so important to the country, and its buyers so international, that it makes more sense to compare these prices in constant-currency terms.

That’s easily done by converting London prices to dollars and then rebasing:

So from an international perspective the boom in London prices was every bit as big as in Miami; they just peaked slightly later. The bust was of the same magnitude, and even more extreme, since it took place through the collapse of sterling rather than the somewhat less rapid fall in property prices. Read more