Does Property Really Double in Value Every 10 Years?

Oct 2, 2017 | Global Property

Property values in many Australian locations have taken off in an era of record-low interest rates and high population growth. If you own property in the South East region of the country, you’re most likely a lot wealthier on paper than you were 10 years ago. But has your property value doubled and if so over what time-frame?

The Rule of 72 is a simple way to determine how long an investment will take to double.  The rule is used for estimating one of two things:

  • the time it takes for a single amount of money to double with a known interest rate, or
  • the rate of interest you need to earn for an amount to double within a known time period.

The rule states that an investment will double when the number 72 is equal to the Per Annum Rate of Return (RoR) multiplied by the number of years (Y).  The formula can be shown as 72 = (RoR) x (Y).

When interest is compounded annually, a single amount will double in each of the following situations:

Rule of 72

Using this rule, the concept that property values double every 10 years requires an average annual growth rate of 7.2%.  Average rates higher than 7.2% will double faster with rates below 7.2% taking longer.

Recent data from CoreLogic has revealed the proportion of properties that are now worth more than double what they were initially purchased for 10 years ago.

Corelogic-double-property-priceSource: CoreLogic

The data shows that nearly half of property owners in Sydney and Melbourne have seen their property double in value since 2007. 10 years ago this was true for 37% of Sydney properties, 38% in Melbourne and 45% nationally.

Of the remaining properties that didn’t double in value there were some that actually declined in value.

Property Value DropSource: CoreLogic

Across the country 3.4% of properties are worth at least 10% less than they were 10 years ago, the highest portion of these coming in Darwin, Perth and Regional areas.

Taking a balanced view of this data, the key distinction is that property does have the ability to double in value over 10 years, but to say that it’s a given is not so simple.  Identifying the right location and the right property within that location will be the major factor in determining your investments performance over the long term. By using leverage and borrowing to invest, you could see your equity in that property appreciate at an even great rate.

<a href="https://ugc.net.au/author/brett/" target="_self">Brett Dickinson</a>

Brett Dickinson

Brett is a Licensed Real Estate Agent and manages United Global Capital's property projects and client acquisitions.

Recent News

Episode 105: How To Wisely Use The Rest Of The Year To Get Ready To Invest In 2021?

Episode 105: How To Wisely Use The Rest Of The Year To Get Ready To Invest In 2021?

This week, the podcast kicks off with a discussion on multiple protests carried out on social media. As many investors begin to feel pessimism in the stock market, Louis provides us with information on how to best prepare yourself to take advantage when the situation reverses. Brett provides an update on the situation of different property markets across Australia. Lastly, Joel provides the US stock market performance and answers the popular question of whether now is a good time to invest.

STAY UP TO DATE

Subscribe here to receive all UGC updates as they happen

Good Move! Keep an eye on your inbox for our next update.