Do house prices still double every 10 years?

The 2020s is shaping up to be the decade with the weakest house price growth in the past 70 years.

While New Zealanders are often told that house prices double every 10 years, in the 2020s so far, house prices have only lifted about 10 percent.

Infometrics chief forecaster Gareth Kiernan calculated that in the 2010s, they increased 113 percent; in the 2000s, 107 percent; in the 1980s, 259 percent; in the 1970s, 230 percent; and in the 1950s, 147 percent.

It is only the 1960s and 1990s that had similarly slow growth, up 53 percent and 45 percent over 10 years in those decades, respectively.

Kiernan noted that in the 1970s and 1980s, inflation meant that house values increased quickly but the real value fell.

"Looking back at the data since 1950, we've got 260 overlapping 10-year periods, of which 143 show a doubling or more in nominal house prices - so about 55 percent of the time. If there's one thing I hate, it's real estate agents trotting out the trope about house prices doubling every 10 years, which by these numbers is true more often than not, but without offering any explanation or rationale for it."

Cotality chief property economist Kelvin Davidson said the outcomes would depend on the start and end points used, and the markets in question.

"Whether you're looking at a national average or particular areas, there'll be some areas that it probably has never really worked for, there'll be others that it does.

"On balance, the rule's kind of held... it looks a bit unlikely to hold right at the current moment.

"It's become a pretty strong belief out there across New Zealand's property market. But of course it's not some mythical automatic rule. It happens for a reason. A downward trend in interest rates, a switch to two-income households, a relatively restricted land supply... and perhaps a slightly favourable tax system for property. All of those things are fundamental factors behind a so-called doubling in house prices every seven to 10 years. Does it hold from here on? I've got my doubts because if you think about some of those things that have driven house prices up, they just can't apply any more."

He said interest rates had already trended to low levels, politicians on both sides seemed intent on increasing land supply, the tax system could become more restrictive and most households that were likely to become double-income earners already were.

"I'm wary of saying this time is different because often it's not. But the fundamentals do look different and I'm a bit wary."

He said some property investors seemed to have shifted their expectations, too. "People are starting to question the assumption and possibly thinking about property investment differently."

Davidson said it could be that a growth rate of 4 percent or 5 percent was more normal in future, compared to the 6 percent or 7 percent seen previously. "If you do lop off a couple of percentage points in terms of long-run average capital growth, prices will eventually double but it's going to take quite a bit longer.

"If you go to a 4 percent growth rate it's going to take 18 years to double. It does sort of push out that horizon to quite a bit longer period of time. It's a bit of an arbitrary number anyway but it's what people have focused on... I think people on the ground are starting to question that. Once that becomes a widespread expectation, it almost becomes self-fulfilling. We might be at a turning point."

Property investor Steve Goodey said it felt as though the property market was at the point in the cycle where people thought it was terrible. "It basically means we're well into the recovery… when the property market is absolutely booming everyone seems to believe it is never going to stop booming.

"When it's in recession or blowing out like it is now, everyone believes it is never going to stop doing this either. Everyone forgets it's a cycle. Also everyone thinks every single time we go through the cycle that it's different to last time. This time the thing the kids have go to play with today is Sharesies or whatever but the fundamentals are still there, people need somewhere to live."

He said the average was for properties to double in value every seven years. "I don't think it happens every cycle but it happens eventually. We're well back into that recovery cycle again. Most properties you find for sale in New Zealand today are on special, and they will go up in the medium term. I just don't think it'll be the next year or two."

NZ house price growth

1950s: 147 percent

1960s: 53 percent

1970s: 230 percent

1980s: 259 percent

1990s: 45 percent

2000s: 107 percent

2010s: 113 percent

2020s so far: 10 percent

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