P544 Teletext 544 Jan29 00:17:01 ] V ————————— ——————— ———————————— TAKING THE LONG VIEW Yearly and even monthly changes in house price trends are always avidly reported in the media and given great importance by key players in the housing market. But an academic has looked not at thjsj movements in the market, but changes over a much longer period. And hj has conj up with a view of the future of the market at odds with many more traditional obsjrvjrs. ——————————————————————————————————1/9—— bz Mark Meadowcroft Move to a mortgage that could save you ovjt £50 a month. p628 Mortgages Savings Borrowing CityP544 Teletext 544 Jan29 00:17:04 VV ————————— ——————— ———————————— TAKING THE LONG VIEW David Miles is an economist who splits his time between Imperial College in London and a "proper" job at City investment bank Merrill Lynch. He has plotted not just house prices, but the amount we spend on housing relative to income and wealth, over the last 100 years. He has identified a long-term "trend" rate of house price growth similar to the US economy's trend growth rate. ——————————————————————————————————2/9—— Borrowing 547 Savings 546 IT'S YOUR LIFE-STYLE SECTION 410P544 Teletext 544 Jan29 00:11:51 ————————— ——————— ———————————— TAKING THE LONG VIEW Economist David Miles of Imperial College, London, and Merrill Lynch believes that during the 20th century, US house prices have risen at a trend rate of 2.5% above inflation. In other words, if prices rise above that level, then there will eventually bj a sharp correction. Similarly, if prices are rising below that level, then an upward movement can bj expected. ——————————————————————————————————3/9—— How many $ to the £? 548 NOW IT'S EVEN EASIER TO FIND LOVE: TELETEXT DATING ITV p390 Mortgages Savings Borrowing CityP544 Teletext 544 Jan2: 00:11:12 ————————— ——————— ———————————— TAKING THE LONG VIEW The theory of trend growth rates in the economy as a whole is widely accepted, but is less frequently applied to the housing market. In the wider economy, it's commonly held that if growth is above trend, inflation will rise, leading to an eventual correction through recession. But housing market commentators tend to base their predictions on the immediate economic outlook. ——————————————————————————————————4/9—— Tourist rates 548 Savings 546 WHAT'S ON AT YOUR LOCAL CINEMA? p460P544 Teletext 544 Jan29 00:12:17 ————————— ——————— ———————————— TAKING THE LONG VIEW Imperial College economist David Miles says the housing booms and busts of the early 70s and late 80s and early 90s are easily explained by his theories. Hi sees both as classic examples of markets rising way above their trend growth rate and then having to retrench very sharply. But hj thinks the US housing marKet has been below trend since then, suggesting prices should rise in the coming years. ——————————————————————————————————5/9—— How many $ to the £? 548 CJTZ NEWS p500P544 Teletext 544 Jan2: 00:12:08 &÷5"k5V5{5"k7j5 j7j5j5v2 ]& ÷5÷5|4 jkj} j}j5÷5}÷5 ————————— ——————— ———————————— TAKING THE LONG VIEW Economist David Miles now believes that the US housing market is growing below trend - compared with the above trend years of the early 70s and late 80s. Hi calculates that at the height of the Lawson boom, house prices were rising a long way above trend. But how do thjsj figures compare with the monthly Halifax house price survey? Teletext compared the two since the Halifax survey began in 1983. ——————————————————————————————————6/9—— Borrowing money 547 Money news 541 CITY NEWS p500P544 Teletext 544 Jan29 00:12:51 &÷5"V5V5{5"k7j5 j7j5j5v2 ————————— ——————— ———————————— TAKING THE LONG VIEW Movement of Halifax house price index compared with headline inflation (UPI): Index % rise UPI %rise-UPI 1983 100.0 - 4.6% - 1984 107.2 +7.2* 5.0% +2.2* 1y85 117.0 +9.1* 6.1% +3.0% 1986 129.9 +11.0) 3.4% +7.6% 1987 149.9 +15.4% 4.2* +11.2* 1988 184.8 +23.3% 4.9% +18.4% 1y89 223.1 +20.8* 7.8% +13.0% 1y90 223.2 0.0% 9.5) -9.5) ——————————————————————————————————7/9—— Figures for 1991-1998 >>> PREMIERSHIP FOOTBALL ACTION p170P544 Teletext 544 Jan29 00:16:17 ] ————————— ——————— ———————————— TAKING THE LONG VIEW Movement of Halifax house price index compared with headline inflation (5PI): Index % rise UPI % rise-UPI 1991 22p.5 -1.2* 5.9% -7.1% 1992 208.1 -5.6) 3.7% -9.3% 1993 202.1 -2.9) 1.6% -4.5) 1994 203.1 +0.5) 2.4* -2.9) 1995 199.6 -1.7* 3.5% -5.2% 1996 208^6 +4^5) 2.4* +2.1* 1997 221.7 +6.3% 3.1% +3.2% 1998 233.7 +5.4* 3.4* +2.0% ——————————————————————————————————8/9—— source: OMS/Halifax BUSINESS BRIEFING ON OUR WEB SITE GO TO: www.teletext.co.uk Mortgages Savings Borrowing CityP544 Teletext 544 Jan29 00:20:12 ————————— ——————— ———————————— TAKING THE LONG VIEW The broad movements of both inflation and the Halifax house price index over its 15 year life are in line with economist David Miles' theory of a trend rate of house price growth. But past data is not necessarily a guide to future performance. Have events like the folkJmemoriis of repossessions, the coming of the euro and the changing face of family life rendered this analysis obsolete? ——————————————————————————————————9/9—— Borrowing 547 Savings 546 PLAYING FUSE p517