Total Posts:3|Showing Posts:1-3
Jump to topic:

low inflation > rising house prices?

grandiose
Posts: 1
Add as Friend
Challenge to a Debate
Send a Message
4/15/2016 10:52:25 PM
Posted: 7 months ago
I'm in Auckland, New Zealand. Our house prices are rising at about 14% a year. There are a number of reasons for this that I do understand: limited restrictions on foreign investment, low interest rates etc, but what I don't understand is why inflation is so low (0.1% according to the Reserve Bank). I assume the talking about the CPI inflation rates?

Why doesn't the massive increase in house prices affect over all inflation? If banks are loaning more money (creating credit) doesn't this mean that there is more money in the economy, which would push up inflation?

Thanks,
Glen
16kadams
Posts: 10,497
Add as Friend
Challenge to a Debate
Send a Message
4/18/2016 5:18:32 AM
Posted: 7 months ago
At 4/15/2016 10:52:25 PM, grandiose wrote:
I'm in Auckland, New Zealand. Our house prices are rising at about 14% a year. There are a number of reasons for this that I do understand: limited restrictions on foreign investment, low interest rates etc, but what I don't understand is why inflation is so low (0.1% according to the Reserve Bank). I assume the talking about the CPI inflation rates?

Why doesn't the massive increase in house prices affect over all inflation? If banks are loaning more money (creating credit) doesn't this mean that there is more money in the economy, which would push up inflation?

Thanks,
Glen

I am pretty sure CPI includes housing prices, so prices in other sectors must be falling. Also remember that energy prices have collapsed and the global economy is still fragile.
https://www.youtube.com...
https://rekonomics.wordpress.com...
"A trend is a trend, but the question is, will it bend? Will it alter its course through some unforeseen force and come to a premature end?" -- Alec Cairncross
16kadams
Posts: 10,497
Add as Friend
Challenge to a Debate
Send a Message
4/18/2016 5:22:37 AM
Posted: 7 months ago
At 4/15/2016 10:52:25 PM, grandiose wrote:
I'm in Auckland, New Zealand. Our house prices are rising at about 14% a year. There are a number of reasons for this that I do understand: limited restrictions on foreign investment, low interest rates etc, but what I don't understand is why inflation is so low (0.1% according to the Reserve Bank). I assume the talking about the CPI inflation rates?

Why doesn't the massive increase in house prices affect over all inflation? If banks are loaning more money (creating credit) doesn't this mean that there is more money in the economy, which would push up inflation?

Thanks,
Glen

Also, the NZ growth rate is around 2%, right? That is alright, but that is still fairly low. So the slow recovery has contributed to lower demand.

That's all I got
https://www.youtube.com...
https://rekonomics.wordpress.com...
"A trend is a trend, but the question is, will it bend? Will it alter its course through some unforeseen force and come to a premature end?" -- Alec Cairncross