ANALYSIS: Why are soaring property prices left out of inflation figures?
For example, if someone gets a builder to build them a brand new home, or to make a major renovation to an existing home, that's considered consumptionWhy? Because the household sector is purchasing a good or service from the business sector, so trade is taking placeAnd that means the prices of the building materials and everything else needed to build the home will be included in official measures ofHowever, if someone buys an already-existing home from someone else, that won't be...
Secondly, an already-existing dwelling is not adding to the supply of homes, and it didn't require the purchase of anything new. It's considered anThat's why soaring property prices, and land values, are excluded from daily measures of inflation. For example, the price of goods and services most of us have to pay for — such as rent, power and water bills, or petrol — often rise faster than prices for things we can live without.They're forced to spend a larger proportion of their incomes on more-expensive goods and services that can't be avoided.
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