Can we have some CPI adjustment?

Once again, NZ homes are at record nominal asking prices.

The real estate industry doesn’t make it easy to do inflation adjustment, but according to this, the average asking price in May last year of $429k  was 2% above the previous month and ‘just topped’ the October 2007 level that was when Realestate.co.nz started publishing the statistic. That means the October 2007 national average asking price was between $420k and $429k.

Suppose you bought a house in October 2007 for $420k and sold it now for the national average asking price of  $445,529.  Those 2007 dollars are worth about $479k  in today’s money, so you would have lost 8%, or about $34,000 in 2012 dollars.   That’s before taking into account maintenance, insurance, interest, and transaction costs.  The conclusion is about the same if you compare to an index of average wages: all these are helpfully provided by the Reserve Bank’s inflation calculator.

The comparison for Auckland may be more favorable — I can’t find what the 2007 average asking price was, but if it was below $535000, then we are at a new peak (or the top of a new bubble).

In May last year, Stuff had a good article on house prices and inflation, and even an infographic that told you more than ‘up’ or ‘down’, but that seems to have been an exception.