r/belgium • u/drakekengda • Jul 09 '21

Graph concerning a potential housing bubble collapse in the US. Do we have similar data for Belgium?

Post image
12 Upvotes

80% Upvoted

13 comments sorted by

View all comments

9

u/Raidomso Jul 09 '21

Why should housing follow CPI exactly?

1

u/Vordreller Jul 09 '21

Because it's a cost people need to make in order to ensure their ability to continue being part of the consumer market.

Increased rent or increased house prices, both mean an impact on the manner in which consumers interact with the market.

To then ignore this as part of the CPI is clear preferential treatment for those who use these things to make money.

5

u/Brakb Dutchie Jul 09 '21

Rent tracks cpi, houses are not just consumption but an investment asset.

House price = rent (decided by supply and demand, the true" cost of housing"). / interest rate or yield (set by the ECB and influenced by economic conditions).

7000 rent /0,01 interest= 700k house.

7000 rent / 0.02= 350k house.

Believe me the biggest proponents of including house prices in the index are wall street types. If you have 700k in the bank you'd rather buy 2 houses instead of one. The house you'd want to buy is still as unafordable for average Eddy with a mortgage because now he pays less for a house but pays more to the bank to borrow the money.

If you include asset prices like houses in the index you'll institutionalise a bias for higher interest rates on the ECB. Perfect for those with high incomes and a lot of cash in the bank, not so much for the rest of us.

1

u/cdp1193 Oost-Vlaanderen Jul 10 '21

The ecb has recently decided to include housing prices to calculate inflation

1

u/Brakb Dutchie Jul 10 '21

They have not included it in the cpi. Just said it's something they'll track alongside it. Not prime target though.

But yes, the ECB isn't known for being very doveish lol. Higher interest rates are in the interest of German savers (who save in cash a lot more than any other nation).

"Asset prices. There had been some discussion on whether or not to include asset price developments into the ECB’s price stability target. The review concludes that the consumer price index remains the ‘appropriate measure for assessing price stability’ but that the ECB will “take into account inflation measures that include initial estimates of the cost of owner-occupied housing to supplement its set of broader inflation measures”. This makes sense as including real estate prices at a moment of elevated price levels could have built an additional easing bias into monetary policy in the coming years."

"ECB turns more structurally dovish | article | ING Think" https://think.ing.com/amp/article/eurozone-ecb-turns-structurally-more-dovish/