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This is the graph of average house price against inflation in the UK.

 

If you notice, something gets a bit weird in the mid 70s, housing prices suddenly start booming. There is an echo as it settles below the progressive increase line.

 

Why is there a progressive increase in the price of housing, a long-term trend beneath the short term fluctuations?

 

Even without the boom & bust madness, an increase of 300% over inflation is pretty extreme. One could also suggest that something went mental in the mid 1970s, and it's been rather erratic ever since.

 

Mysterious.

 

One thing is for sure, prices can't exponentially rise on their current trend ad-infinitum. It'd be a sizeable drop if the market settles back to the sub-trend, or goes below the line of the sub-trend.

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