Two houses were purchased at the beginning of Year 4 for $100,000 each, one in the Capital and one Outside. Assuming the value of both houses rose in line with the House Price
Index, what would be the difference in their prices by the beginning of Year 5?
Price Indices
House Price Index (start of year)
In the Capital Outside Capital
Retail Price Index
(start of year)
Inflation Rate
(for the year)
Year 1
100
85
100.0
1.5%
Year 2
118
99
101.6
1.6%
Year 3
134
115
103.7
2.0%
Year 4
182
146
106.1
1.6%
Year 5
216
175
113.3
5.6%
Year 6
261
211
117.6
4.2%
A price index is a measure of the average rate of change in the price of specific goods