Sunday, March 23, 2008

UK House Prices as Multiple of Average Earnings

Ok I keep going on about this metric so I had a dig around the internet for the raw data and here then is the finished product.



Surprisingly then the multiple is currently aprox. 7.38, wow. Also I hand't realsied that the graph for the UK has yet to start falling. The data here goes up to the end of 2007 at which time the price was still rising. This graphs looks pretty 'toppy' though to my eyes.

A similar, but not directly comparable graph GMO drew for the US in Januray shows median home price over median family income. That multiple has a mean at 2.8, peaked at 3.9 in 2005 and had fallen to 3.7 by the end of 2007. So the fall has been going on sometime across the pond.

Note however that the national US picture doesn't do justice to the extent of the bubble in specific regions, or specifically what Paul Krugman refers to as zoned areas (where land isn't in inexaustible supply) in this video...



Along with the TED spread this is one of those graphs that will take pride of place as part of my 'economic radar'.


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Earnings data going back to 1952 was found here:
http://www.measuringworth.com/ukearncpi/

Unfortunately the numbers were rebased to 1913=100, so then I had to dig out some figures dealing in real unadjusted pounds from the ONS, e.g. from here.

http://www.statistics.gov.uk/cci/nugget.asp?id=285


And the house price data going back to 1952 came from this lovely resource at the Nationwide:

http://www.nationwide.co.uk/hpi/historical.htm

4 comments:

project 1000 said...

Excellent data - are you able to update it for the present?

ive been looking on the net and its very hard to get this basic data- well played for making it available

tom

Colin Green said...

Not sure if you will recieve this but yes I think it's about time I updated this graph. I moved over to Livejournal so check out my blog there.

Gprofessionals said...

It is clear from the graph that the home prices immediately increased after 1988, but what is the present status of House prices and average earnings.
High CD Rates

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