This calculator is only measuring inflation (the devaluation of money). A 2010 ten pound note isn't worth as much as a 1996 ten pound note, because (generally speaking) prices are higher today -- in 2010, a particular quantity of money buys less than it did in 1996.tintin40":25tx7ewp said:
So if property prices had only increased in line with inflation, then you would need 55,000 of today's pounds to cover that 1996 price tag.
But property prices are much more influenced by the availability of credit than anything else. When interest rates are low and money is easy to borrow, the buying side of the market dives in and pays whatever the estate agent declares the property is "worth". This justifies the valuation, and it's in the estate agent's interest to keep pushing those prices up. So property price rises aren't due to the devaluation of money, just the result of a credit-fuelled bubble.
The reason that this calculator interests me is because I might be buying a modern hardtail (Genesis Altitude) for £800, and my first thought was "Good grief, that's almost twice what my Sahara cost!". Except that it isn't. Accounting for the difference in value between 1993 pounds and 2010 pounds, the price isn't so different after all...
