Comments on: What is your total property return? https://twentythirdfloor.co.za/2008/07/07/what-is-your-total-property-return/ Perspectives Sun, 20 Jul 2008 00:24:31 +0000 hourly 1 https://wordpress.org/?v=6.9.1 By: David Kirk https://twentythirdfloor.co.za/2008/07/07/what-is-your-total-property-return/comment-page-1/#comment-14281 Sun, 20 Jul 2008 00:24:31 +0000 http://twentythirdfloor.co.za/?p=114#comment-14281 I wish I had included that point in the main post. As you mention, this effect is likely to both bias the rate of growth in the index upwards and introduce a cyclical distortion over time as the extent of improvements changes.

Some methods of adjusting the basket to reflect differences in erf size, number of rooms, house area etc. might take small elements on that into account. I’ve seen this done with GLM with mixed results. However, qualitative improvements (and knock-down-rebuild) will still be entirely missed.

]]> By: Andrew Warren https://twentythirdfloor.co.za/2008/07/07/what-is-your-total-property-return/comment-page-1/#comment-14272 Fri, 18 Jul 2008 17:44:04 +0000 http://twentythirdfloor.co.za/?p=114#comment-14272 David

The one thibg about the so-called “property index” that has always amazed me is that it does not take into account the capital investement into the market.

I buy a house for R600k, spend R500k fixing it up and then sell it for R1.2m. The bank’s index will view my house as having 100% growth in value in the period. I have barely met my carry costs.

The extent to which the building activity (which mind you has slowed down a lot in the last few months) fueled the increase in house prices does not seem to be factored into the stats from 2002 to 2007.

C ya

Andrew

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