Showing posts from 2013

Very long term property investment and inflation

The  Herengracht Index  was a very long study (1628 - 1973) of house prices of a particular property development in Amsterdam where the buildings have persistently remained of constant high quality over time.  The study compared: a real terms price index linked to the use value of the property; with the nominal value of the property (i.e. cash value).  The study demonstrated that in the very long run house prices generally rise with inflation. There are market cycles but this is the very long term trend. Data points: 1628 - 1973 - biennial logarithmic price changes in the Herengracht index Nominal index: mean 1.83 standard deviation 17.65 Real index: mean: 0.45 standard deviation 18.50 Note the wide standard deviations reflecting price volatility. Another key observation is that there was a jump in nominal price in the face of an essentially flat real index after the Second World War. This jump arose (and continues) because the reserve currency of