Monday, October 12, 2009

Selling our house: the first offer

Today we received the first offer for our house, one for £325,000 which we rejected.

We bought our house six years ago in October 2003 for £300,000. Over recent years the Government has operated an annualised inflation target of 2.5%, around which the actual rate has fluctuated.

Given a nominal 2.5% inflation rate, what is the equivalent today of £300,000 six years ago?

Answer: £300,000 times 1.0256 = £348,000.

Even if we achieve our target price of £350,000 we will have made essentially a zero capital gain - in fact a significant loss once you take transaction charges into account.

Who says that property is a good investment?