Property Value fell 197.4% Priced in commoditys
| April 10, 2011 | Posted by dan under Money |
It is assumed the highest value of property was reached around the 2006/2007 mark. When people ask me the direction of property prices it was one of the harder elements within the economy to predict. The reason for this is because there are two primary forces effecting the price. One is the obvious inflation built into the very nature of our economy as explained here, and it was this factor that made decisions like predicting the price of gold/silver and just about any commodity of a limited supply easy in the fact it would naturally require more money to purchase as the money supply was increased and so we could see it was going to go up in price.
However although property is a tangible asset of which there is a limited supply and so you would expect it to react in a like manner to other commodity’s, you have to consider the human element within the economy which most economist are pig ignorant of. Because it does not matter how much money is being printed, if that money is not in the hands of the general public and is instead consolidated into the hands of shareholders, traders, bankers and cash sitting in hedge funds, then regardless of inflation the price of property will only ever reach the maximum the critical mass of the population can afford. But then you may argue but those who are filthy rich who have this consolidated wealth will buy the property as an investment and rent it out and thus their buying will push the price up in accord with inflation? Of which it can temporarily but the rent charged will also be subject to an upper limit of what the critical mass of the population can afford. There is a way to increase house prices artificially and that would be for these institutions and wealthy individuals to buy property and then leave it vacant because no one can afford to buy it or rent it, and this is indeed happening, there are many vacant property’s all left on the books of banks and property’s not being put on the market so they do not make a loss and thus can keep the value of their portfolio artificially high, and yet this is an illusionary high it has no value behind it.
However even with this false attempt to prop up property prices they have indeed been falling dramatically in value since 2001 at which I call the actual top in the value of the property market unlike the commonly accepted 2006/7.
Price and value are different things you price a thing to provide it with its assumed value however what you price it in (public credit) is not a fixed constant like gold or silver but a fluctuating one which is the dollar or the pound or euro or whatever. And so all these fluctuating weights and measure create smoke and mirrors so you cannot grasp whats actually happening. So lets remove some of that smoke and mirrors for you with regards to property price and use the UK as an example. Using figures from the nationwide building society for inflation adjusted house price. Medium price in 2001 was £129,796 and in 2011 £172,426 source here. But now lets look at the commodity price index for the same time period, the commodity price index which is a fixed-weight index or average of selected commodity prices designed to be representative of the broad commodity asset class.
So heres the commodity price index chart from 2001 to 2011
Thats a 229.66% increase which we can thank to the fractional reserve banking system, oh if you want another way to look at it it can be seen as a 229.66% decrease in the value of your time and energy the value of your labor and work because thats where the profit comes from as you are in the end the only source of real value within the economy your time and energy not any tangible asset as explained here. But I digress so let me get back on point with house value as previously stated house prices in 2001 was £129,796 and in 2011 £172,426 a percentage increase of of 32.3% however if we measure the house price rise against the rise in your average commodity out there we get 229.66% – 32.3% = 197.4% decrease in the actual value not price in property.
Prediction of future house price and value
As you can see price and value are two different things but I see both will fall in the future. The drop in value will be drastic which as pointed out above already is at drastic levels compared to other areas of the economy such as commoditys. However I will also predict we will get a further steady decline of prices even in this highly inflationary environment, because of the knock on effect of inflation on people and business mainly in the form of unemployment. Expect a 30-40% decline in PRICE as well as a further 200% decline in value.
Update 17th April – people have pointed out how can somthing decline more than 100% which is a reasonable question and of course the price of a thing cannot decline more than 100% or you would essentially be paying someone to buy that thing…., But the value of currency can theoretically devalue indefinitely, because whatever value lets say the pound drops to becomes its current 100% value which it can then drop again from that point and repeat that process until the currency is hyperinflated. So its not the price of property that has fallen 197% it is its value priced in currency in comparison with commodity’s that has fallen that much.
