The Aotearoa real estate multiplier

A spate of articles earlier this year looked at whether house prices doubled every ten years (Church, 2022; Edmunds, 2024; McKnight, 2024). The 'doubling by the decade' has been proposed as a rough rule of real estate thumb, but when I looked at the figures way back in 2010, I remember that real estate price doubling seemed to take 12 years, not 10. And while that is reasonably close to a decade, it is not a decade. And now I can't find my workings from the time. Sigh.

However, data from the property data company - Valocity - show that the average house prices doubled between 1990 and 2011 (Church, 2022) which I note is 11 years; and "took twelve years to double in the years between 2012 and 2021" (Church, 2022). 

The multiplier used by "Opes Partners is that Auckland house prices will increase 6% per year over the long term – compared with 5% for the rest of the country. [...]  Over the last 30+ years (Jan 1992 – Dec 2023) [New Zealand] house prices, excluding Auckland, increased 6.2% per year. House prices in Auckland increased 7.0% per year" (McKnight, 2024). If we multiply that out using the Future Value calculator, a house worth $1m today in Auckland would be worth $1.97m in 2034 (Real Estate Calculators, 2024). That's pretty close to doubling; another 3 months needed to actually double in the big A. Using the 6% for the rest of NZ, a decade yields $1.8m outside Auckland; so 12 years to double... the figure that I had worked out fourteen years ago.

Economist Shamubeel Eaqub said "there were only a few instances where house prices had doubled over 10 years: 1950-60, 1964-74, any 10-year period between 1994-2004 and 1998-2008, and any 10-year period between 2010-20 and 2013-23" (Edmunds, 2024). Good to know it takes a bit longer... but when we compare price of living and wage increases to real estate prices, it becomes easy to see why it is becoming harder for young people to get on the property ladder.

It is also interesting that the 'doubling by the decade' rule of thumb has been with us since the 1950s. We are quite good at noticing patterns, if not entirely accurate until we look at the actual numbers.

So 10.25 years in Auckland; 12 years in the rest of Aotearoa for property to double. Good to know.

Sam

References:

Church, A. (2022, June 30). Houses To Take Longer To Double In Value. Scoop. https://www.scoop.co.nz/stories/BU2206/S00494/houses-to-take-longer-to-double-in-value.htm

Edmunds, S. (2024, February 13). House prices double in 10 years - but can it continue?. Stuff. https://www.stuff.co.nz/money/350176470/house-prices-double-10-years-can-it-continue#:~:text=House%20prices%20in%20most%20parts,19%20regions%20at%20least%20doubled

Real Estate Calculators. (2024). Future Home Value Calculator. https://www.real-estate-calculators.com/future-home-value-calculator/

McKnight, E. (2024, January 10). What's happening with NZ house prices right now?. Opes Partners. https://www.opespartners.co.nz/property-markets