how can there be almost no inflation in Ireland if property has gone up by so much?

armabelle

maninasia wrote: »

Rents have gone up all over the country and in the major urban areas where most live they have gone up the most!

of course they have, you don't have to be an economist to know this and this increase is what takes most money out of peoples pockets at the end of the month yet inflation figures show 0%, hence my confusion.

Geuze

armabelle wrote: »

Yes I know they "are" but are they really? if the rents have gone up by so much why hasn't it made the inflation figures higher. I can't see what other monthly expenses have gone down so much as to compensate for this keeping inflation @ 0%

Please read the CSO data on the CPI, here:

http://www.cso.ie/en/releasesandpublications/er/cpi/consumerpriceindexnovember2016/

Yes, rents are included, and yes, private rents rose 45% in five years.

armabelle

Geuze wrote: »

Please read the CSO data on the CPI, here:

http://www.cso.ie/en/releasesandpublications/er/cpi/consumerpriceindexnovember2016/

Yes, rents are included, and yes, private rents rose 45% in five years.

I suppose since only a percentage of people actually rent, the figure would not have much weight in the grand scheme of things.

in table 7 in this link

http://www.cso.ie/en/releasesandpublications/er/cpi/consumerpriceindexnovember2016/

what does the "weight" column refer to?

CelticRambler

CPI Item Weights

The CPI measures in index form the monthly changes in the cost of purchasing a fixed representative ‘basket’ of consumer goods and services (i.e. Laspeyres formula). Identical items are priced in the same outlet on each occasion so that changes in the cost of this constant basket reflect only pure price changes. The current basket of goods and services consists of 634 representative items which were predominantly selected as part of the December 2011 rebase. The exception was two new items, water supply and sewage collection, which were introduced in January 2015. The representative share of each item in the basket is proportional to the average amount purchased by all households in the State and foreign tourists in Ireland based primarily on the 2009/2010 Household Budget Survey (HBS) and estimates of expenditure by foreign tourists across a range of consumer goods and services. When the new COICOP class (4-digit) level weights were introduced with the January 2013 index, the CPI item weights were also updated. The CPI item weights were calculated on a pro rata basis using proportions from the December 2011 rebase. A similar approach was taken when updating the 2016 item weights.

From "Background Notes" in the same document.

maninasia

armabelle wrote: »

maninasia wrote: »

Rents have gone up all over the country and in the major urban areas where most live they have gone up the most!

of course they have, you don't have to be an economist to know this and this increase is what takes most money out of peoples pockets at the end of the month yet inflation figures show 0%, hence my confusion.

I'm actually in agreement with you, I knew the old trick governments do in ignoring property price inflation although I'm amused that they classify it as an investment even though they are usually purchased on massive credit loans.

Anyway, I still think rental increases should feed through to the inflation number as housing expense is the largest expense many people have.
Why this might not be happening is
A) the government is gaming the weighting of
The rental increase
many are on rent allowance or subsidies therefore not paying their own rent

maninasia

armabelle wrote: »

maninasia wrote: »

Rents have gone up all over the country and in the major urban areas where most live they have gone up the most!

of course they have, you don't have to be an economist to know this and this increase is what takes most money out of peoples pockets at the end of the month yet inflation figures show 0%, hence my confusion.

I'm actually in agreement with you, I knew the old trick governments do in ignoring property price inflation although I'm amused that they classify it as an investment even though they are usually purchased on massive credit loans.

Anyway, I still think rental increases should feed through to the inflation number as housing expense is the largest expense many people have.
Why this might not be happening is
A) the government is gaming the weighting of
The rental increase
many are on rent allowance or subsidies therefore not paying their own rent (not sure if this applicable)
C) many houses and tenants are not in official numbers perhaps skewing the statistics (i.e. Cash in hand rent?)

Geuze

armabelle wrote: »

I suppose since only a percentage of people actually rent, the figure would not have much weight in the grand scheme of things.

in table 7 in this link

http://www.cso.ie/en/releasesandpublications/er/cpi/consumerpriceindexnovember2016/

what does the "weight" column refer to?

I don't know you, so I assume that you, or anybody, has some idea of what is meant by the weights in the CPI.

Rents represent 6% of typical household spending, so rents get that weight in the CPI basket.

Now, a fair point is that the weights don't get updated often enough.

I am happy to ring you to discuss any of these issues, it's what I do for a living.

armabelle

Geuze wrote: »

I don't know you, so I assume that you, or anybody, has some idea of what is meant by the weights in the CPI.

Rents represent 6% of typical household spending, so rents get that weight in the CPI basket.

Now, a fair point is that the weights don't get updated often enough.

I am happy to ring you to discuss any of these issues, it's what I do for a living.

Ok I understand. Do we know how many people in Ireland rent?

KyussBeeshop

OP, play around with the CSO stats here - very useful for combing through individual detailed stats, and creating graphs/tables:
http://www.cso.ie/px/pxeirestat/Database/eirestat/Consumer%20Prices%20Monthly%20Series/Consumer%20Prices%20Monthly%20Series_statbank.asp?SP=Consumer%20Prices%20Monthly%20Series&Planguage=0

There's definitely something weird about how the CSO keeps track of housing/rent costs. They seem to bundle housing into the same set of CPI data, as electricity/fuel costs:

http://www.cso.ie/px/pxeirestat/Statire/SelectVarVal/Define.asp?maintable=CPM01&PLanguage=0

I don't know what to make of those stats myself. The shifts in the price of oil will have affected that. Seems really odd to bundle housing in with those other stats.

These stats are more clear, but no idea how they are factored into the main CPI calculations:

http://www.cso.ie/px/pxeirestat/Statire/SelectVarVal/Define.asp?maintable=CPM15&PLanguage=0


http://www.cso.ie/px/pxeirestat/Statire/SelectVarVal/Define.asp?maintable=CPM13&PLanguage=0

Geuze

armabelle wrote: »

Ok I understand. Do we know how many people in Ireland rent?

Good point.

The rise in renting as a tenure may not yet have been matched with a rise in the weight given to rents in the CPI.

Suryavarman

listermint wrote: »

Because Economics is no more than guess work mostly informed guess work none the less and they do alot of juking the stats regular game of yearly optics they set the rules to bring an outcome.

"Findings of economists conflict with my priors so I'm going to pretend they're all con artists so I can pretend I'm correct".

armabelle

Geuze wrote: »

Good point.

The rise in renting as a tenure may not yet have been matched with a rise in the weight given to rents in the CPI.

I want to take a step back and just ask, what is the point of the CPI?

Slydice

armabelle wrote: »

I want to take a step back and just ask, what is the point of the CPI?

The CSO website says:
http://www.cso.ie/en/surveysandmethodology/prices/consumerpriceindex/

Survey purpose:

To measure the change in the average level of prices of consumer goods and services.

armabelle

Slydice wrote: »

The CSO website says:
http://www.cso.ie/en/surveysandmethodology/prices/consumerpriceindex/

And you personally think that the survey is an accurate representation of inflation in Ireland?

Slydice

armabelle wrote: »

And you personally think that the survey is an accurate representation of inflation in Ireland?

I'm trying to answer your questions about it as best I can.

I think you are seeing something.

I think you want it to be different.

I know there's a problem. I've been tracking homelessness on this thread:
http://www.boards.ie/vbulletin/showthread.php?p=102104212#post102104212

armabelle

Slydice wrote: »

I'm trying to answer your questions about it as best I can.

I think you are seeing something.

I think you want it to be different.

I know there's a problem. I've been tracking homelessness on this thread:
http://www.boards.ie/vbulletin/showthread.php?p=102104212#post102104212

so someone starts asking questions and it can't be simply because they want to inform themselves?

Slydice

armabelle wrote: »

so someone starts asking questions and it can't be simply because they want to inform themselves?

can it be both? or more?:)

armabelle

Slydice wrote: »

can it be both? or more?:)

it can for sure but in this case I only want to try understand how stuff works, I think I want answers but unlike neo, I am not prepared to take the blue pill else it will consume much of my days and nights learning about all this stuff. I guess I wanted a short cut to just learn a part of it because economics is no picnic basket

Slydice

Cool. I think learning about it is useful.

I think I didn't answer this well the first time around:

armabelle wrote: »

And you personally think that the survey is an accurate representation of inflation in Ireland?

I think it's what they have chosen to measure. I think they've laid out their reasoning about what they use. After that, as it's the CSO, I'd say they do their work properly and that the figures they have given are accurate for what they have decided to measure.

The Wikipedia article on Inflation Measures
https://en.wikipedia.org/wiki/Inflation#Measures

It mentions a potential 'Asset price inflation' measure but I cannot find one for Ireland.

I'd say one of the closest would be the Housing prices one that I mentioned earlier:

Slydice wrote: »

House prices are seen rising but on a separate page here:
http://www.cso.ie/en/releasesandpublications/ep/p-rppi/residentialpropertypriceindexoctober2016/

Suryavarman

armabelle wrote: »

And you personally think that the survey is an accurate representation of inflation in Ireland?

Yes it is.

armabelle

Suryavarman wrote: »

Yes it is.

so with a 1% raise in my salary annualy, I should be happy with that too right as my salary is now worth more than inflation?

Suryavarman

armabelle wrote: »

so with a 1% raise in my salary annualy, I should be happy with that too right as my salary is now worth more than inflation?

That's for you to decide.

Arthur Daley

Good to question these stats. But most people can use common sense and just don't believe the inflation stats the experts peddle. They are useful for employers to throw at employees each year to keep wages and pensions supressed.

A wall of money printing is running it's course through this decade. We have not yet been handed the final bill for this largesse by the central banks. Thanks to this cheap money supply there are bubbles forming in everything from property and the ftse to fine art and classic cars.

armabelle

Suryavarman wrote: »

That's for you to decide.

would you be happy with a 1% rise in your salary?

Geuze

armabelle wrote: »

And you personally think that the survey is an accurate representation of inflation in Ireland?

I do.

I have faith in the CSO.

Now, it is well known that different groups of people can face different inflation rates.

If you were a tenant in Dublin, who spent a lot on health insurance, and facing those two costs rise a lot over the last five years, you might dismiss the CPI. But it is a national price index, not specific to one cohort.

armabelle

Geuze wrote: »

I do.

I have faith in the CSO.

Now, it is well known that different groups of people can face different inflation rates.

If you were a tenant in Dublin, who spent a lot on health insurance, and facing those two costs rise a lot over the last five years, you might dismiss the CPI. But it is a national price index, not specific to one cohort.

Why would a tenant in Dublin spend more over the past 5 years on health insurance and rent as opposed to a tenant in Cork or Limerick. Haven't rents and insurance gone up for people in those towns as well?

So I guess only tenants are affected by the huge increase in property then and those paying mortgages would actually be in a better position if they purchased their houses post 2009 right?

Finally, do you know if there is a place where one can see the rental vs mortgage stats for Ireland? So, how many people own and how many people rent and how many people have mortgages?

Geuze

armabelle wrote: »

Why would a tenant in Dublin spend more over the past 5 years on health insurance and rent as opposed to a tenant in Cork or Limerick. Haven't rents and insurance gone up for people in those towns as well?

So I guess only tenants are affected by the huge increase in property then and those paying mortgages would actually be in a better position if they purchased their houses post 2009 right?

Finally, do you know if there is a place where one can see the rental vs mortgage stats for Ireland? So, how many people own and how many people rent and how many people have mortgages?

Rents have risen faster in Dublin than elsewhere, so a Dublin tenant's inflation rate may be higher than other people's.

Census 2011 has info on home ownership.

http://www.cso.ie/en/census/census2011reports/

Try profile 4 or 5.

Geuze

armabelle wrote: »

So I guess only tenants are affected by the huge increase in property then and those paying mortgages would actually be in a better position if they purchased their houses post 2009 right?

Yes, as mortgage rates have fallen.

The interest cost on my tracker fell sharply.

maninasia

It's an investment until it's a loss..and that's the problem with assuming it's JUST an investment whereas it could also be classified as an expense at times.

draiochtanois

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