The constant dollar revenue is usually presented as compared to
a base year. In this case, since no base year is mentioned, we will
assume the base to be 100. This is the base year and all the
inflation figures in terms of CPI are quoted in reference to this
figure
The constant dollar income is calculated as- |
Income in given year/CPI in given year* CPI is base year |
Constatnt $$ revenue in 2012- (wrt to base year) |
=40892.75/229.604*100 |
17810.12 |
Constatnt $$ revenue in 1984- (wrt to base year) |
=13366.55/103.933*100 |
12860.74 |
Constatnt $$ revenue in 1984- (wrt to 2012) |
=13366.55/103.933*229.604 |
29528.77 |
Annualized growth rate in revenue | Annualized growth rate CPI inflation | ||
40892.77 | 229.604 | 2012 | |
13366.55 | 103.933 | 1984 | |
4.07% | 2.87% | growth rate | |
=(40892.77/13366.55)^(1/(2012-1984))-1 | =(229.604/103.933)^(1/(2012-1984))-1 |
It can be seen from above that the revenue income has increased at a higher rate than the CPI inflation. Also, the constant $$ revenue in 2012 is higher than that in 1984. Hence, there appears to be no need to increase the rent
However, in the view of recent events, we can look at the rent
from 2007 to 2012.
Annualized growth rate in revenue | Annualized growth rate CPI inflation | |
40892.77 | 229.604 | 2012 |
41430.22 | 207.344 | 2007 |
-0.26% | 2.06% | growth rate |
=(40892.77/41430.22)^(1/(2012-2017))-1 | =(229.604/207.344)^(1/(2012-2007))-1 |
It can be seen that the rent in real and constant $$ terms has
fallen from the peak of 2007 numbers. While 2007-08 numbers were
during the time when the real estate bubble was at the peak, it can
be used as argument to raise the rent.
Year | Nominal rent | CPI | 2012 nominal rent |
1984 | 13366 | 103.933 | 29528 |
1990 | 18379 | 130.658 | 32297 |
1996 | 23575 | 156.858 | 34508 |
2002 | 30417 | 179.867 | 38828 |
2008 | 40823 | 215.254 | 43544 |
2012 | 40892 | 229.604 | 40892 |
In the graph below, nominal rent and CPI are almost overlapping
and hence, cant be seen separate
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