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Fact or Fiction: House Prices Double Every 10 Years

Adam Hosker

1,426 views

It's a common saying especially with salesmen that "Property prices double every 10 years".

 

This is not true for a few reasons:

  • there is no guarantee for capital appreciation.
  • you may buy at the peak.
  • regional anomalies.

 

Although it is true, that using house price data from 1975 to 2015 (attached spreadsheet) that on average house prices do double every 10-to-15 years.
If you buy at a peak and house prices fall, the data suggests it may be wise to gamble on history and hold on to the property until house prices restore in about 10-to-15 years.
The data does not show that if you buy at a peak, than in 10 years a new peak will be double the size of that peak.

 

buy-low-sell-high-domain-name.jpg

 

The problem is we are working on nationwide averages. Is it true that house prices double "up north"? or that London and the South East are skewing the nationwide statistics. Local issues may cause the value of a property to keep low despite a national increase.

 

In addition whilst we can use history as a guidance, capital appreciation is never guaranteed - past performance is not a guaranteed indicator of future growth.

 

Statistics may also mislead us on property types - perhaps a over saturation of Flats in a city will see those values flat line whilst houses in the area may rally.

 

The mantra of house prices double every 10 years is one adopted by long-term property investors that use leveraging. It is justification for their business model that even if house prices fall (and their equity is eaten away) in 10-15 years the value will be restored or greater. Whilst they in the meantime enjoy the rental yield.

 

A little-forgotten thing called Inflation will also eat into the value. Is the £1 today worth the same as £1 will be in 10-to-15 years time.  Foreign buyers will also have the exchange rate to deal with.

 

It comes down to WHERE, WHEN, WHICH, if you OVERPAID and LUCK.

 

Enjoy the data, timing is everything. One could even say if you bought in 1997, 1996 you could have tripled house prices!

 

CONCLUSION:

FACT!(ish)

 

TL;DR: Data shows the mantra is true but the data may not be that great for you specificly. Plus past performance is good for due diligence it is not a guaranteed indicator of future growth.

 

DOWNLOAD: house-price-increase.xls

 

Welcome! Please feel free to Register and Comment, tell me im wrong! or help me prove a point - we love a good property debate.

 

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1 Comment


As you say the historical increase is partly a function of inflation anyway so of no real value. But inflation erodes debt in a BLT model. However we are now edging on a preiod of deflation, which would have the opposite effect and logic would suggest that would apply to house prices also, at least in the over-inflated southern environs. I don't see house prices doubling in the next 10 years. With very low RPI inflation (if it continues) and currently very high price/ wage ratios particularly in the south, it wouldn't surprise me if they weren't much above what they are now, lower in some cases. 

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