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Property's fine forecast

Where will house prices be in 10 years' time? It’s a question that confronts almost every buyer. Framed differently, what are reasonable expectations for the return I will make on my biggest lifetime investment?

We recently tried to tackle this subject through some independent analysis. In particular, we surveyed 21 leading market economists – including all the big bulls and bears – for their expectations of nominal house price growth over the next 10 years. To the best of our knowledge, a survey of this kind has never been conducted before. And the (anonymous) results, which I will come to shortly, are fascinating.

Prior to commencing this test, our own projection was that, all else being equal, nominal house price appreciation would average around 4.5 per cent per annum on the basis that this was a fair benchmark for disposable income growth over the ensuing decade.

By way of historical context, disposable income on a per household basis has averaged a healthy 5.8 per cent per annum over the last 10 years, and 4.9 per cent per annum over the past 18 years.

Yet for a range of reasons that I have explained many times before – including the once-off, 40 per cent plus reduction in nominal interest rates over the 1980 to 2011 period – historical house price appreciation has consistently outperformed disposable income growth.

Source: Business Spectator