Do house prices double every 10 years?

by Alistair Helm in


It's a fairly commonly held belief that house prices double every 10 years.

Is is correct? can it be guaranteed? and is there fact to back up the assertion? In researching this question, I found that asking the question on Google "Do house prices double every 10 years" provides a pretty comprehensive pedigree of search results, 339 million to be exact.

Among the top results I found that, an Australasian report by Core Logic which analysed the two 10 year periods from 1996 to 2006 and from 2006 to 2016. The earlier period did see consistent doubling (or more) of house prices across the major metros, whilst the later period only saw a doubling in Melbourne whilst Sydney managed a 78% rise.

The UK has similarly experienced doubling in house prices over 10 year periods with an excellent analysis by Alex King providing facts adjusted for inflation covering many decades.

Before diving into the NZ data, it is worth reminding ourselves of the mathematical fact that for a sum of money to double in 10 years requires an annual compound interest factor of just over 7%.


New Zealand - Total All Properties

Using the REINZ House Price Index as the measure of house sales price tracking back to 1992 I have created this chart below to best answer the question - do house prices double every 10 years? Simply viewed each bar represents the rise in prices for a 10 year period.

The black horizontal bar shows the 100% increase threshold. It can be very clearly seen that from October 2003 right through to November 2011, (with just a short period in 2009) property prices doubled, comparing a single month with the same month 10 years ago. The peak rise in any 10 year period was around mid 2007 (just prior to the GFC) when 10 year price rises topped out at just below 120%. 

The period since the end of 2011 though has refuted the claim of doubling prices every 10 years. Over the past 7 years, 10 year growth has been well shy of doubling, achieving around an average of 65% growth in each 10 year period.

Across the 26 years (198 months) the average 10 year rise was 88% with the median rise in any 10 year period 97%. Over that 26 year period just under half the time (43%) saw prices doubling or more


Auckland

So what about Auckland, the leading metropolitan region of the country? - most of the media portray the Auckland market are constantly bubbling and among the most expensive cities to live in. What does the data show?

This chart is certainly illuminating and somewhat surprising. Compared to all of NZ, Auckland has sustained a relatively consistent higher 10 year growth in prices with an average 10 year growth of 98%, well ahead of the NZ total at 88%. However the periods during which a doubling was seen were fewer and not aligned to those of those of total NZ. In just 72 of the 198 months was a 10 year doubling witnessed - less than the 85 for total NZ and the highest 10 year rises where in early years of the new millennium and the recent boom cycle.


Total New Zealand excluding Auckland

If you extract the Auckland price rises from New Zealand in total you get a very different answer to the question - do house price double every 10 years?

During the period of 2005 and 2008 in the run up to the GFC the 10 year respective rise 10 years later as seen between 2015 and 2018 property sales prices outside of Auckland would be barely 40% which is an equivalent rate of 3.4%, certainly ahead of inflation but probably below the prevailing mortgage rates for the period.

So can it be said that property prices double every 10 years? - clearly not; as to make such a statement is always made assuming the past is the best indicator of the future which we all know is wrong. However it would be true to state that in the case of Auckland that over the past 20 years property prices have pretty much consistently doubled every 10 years as the median 10 year rise is 96%. 


Subsequent to writing this article I was asked via a question on LinkedIn as to whether property prices quadrupled over a 20 year period. I had not heard such an assertion, however upon Googling I found it was quoted as a fact. So I naturally went and did the analysis and then wrote this article - Do house prices quadruple every 20 years?