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easy2012

Equities Vs House Price (Illustration)

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Period: 1965 - 2009

Berkshire Hathway : $18 -> $120000 (21.5% nominal compound or 6396x over 45 years)

S&P (raw): 86 - 880 ( 5.6% nominal compound) http://www.measuringworth.com/DJIA_SP_NASDAQ/result.php [9.3x over 45 years]

S&P (div reinvest): 9155 - 357546 (S&P reconstructed back to 1871, 1871 = 4.44) : 39x over 45 years

Prime estate (Kiddington hall, bought £115k in 1950, so let assume it to be around £300k by 1965):

£300k -> £42,000,000 (140x or 11.6% nominal & compounded. Much less if maintenance cost taken into account. Assume

the £42k asking price was met. A £15k offer was made to buy part of the estate sometimes back.)

UK Nominal per captia GDP (£660 -> 23212) 36x

UK Greater london average price ( £5900 -> £400,000 ) : 68x

(I only have data for 1969 which is £6,195, so estimate 5900 for 1965. 2010 data from BBC http://news.bbc.co.uk/1/shared/spl/hi/in_depth/uk_house_prices/counties/html/county39.stm)

Average house price Whole UK: (£4500 -> £167000) : 37x (Data for house in 1969 : 4640, est 4500 1965). Nominal growth 8.36%

compound pa.

I would have thought broad stock market index would have beat housing flat over 45 years... interesting they are just roughly the same (S&P vs average UK house). I assume leverage effect of purchasing a house is negligible over such a long period of time (unless one keep MEW and keep leveraging) and maintenance cost roughtly equals equivalent rent.

Disclaimer: This is not investment advice. Further caveat, all these happen during the so-called debt supercycle 1945 - 2010+

Edited by easybetman

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Is there one of those "which investments did best" charts somewhere? The one they show you when trying to convince you they know what they're talking about re:investments?

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Quite astonishing how well houses have done in the UK. Here is the comparable US data that I have:

Stocks from January 1963 to January 2010 based on the Fama & French total return data: 10.2% nominal annualised return (this is based on mid-value large cap stocks which is probably the closest to the total stock market return. By the way small value stocks returned 16.6% each year).

Median house prices 5.5% nominal annualised return.

Inflation was 4.3% per year over that period and the average house size has approximately doubled over that period so the house price growth in no way is like for like.

No wonder that the manias in the US are usually about stocks and how abnormal the recent housing bubble was.

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... and the pound crashed from $3 after WWII, down to the $2.60 region, then lower and lower to $1 in the early 1980's before bouncing.

Technically, the pound has halved in "value" over the date range you show, so UK houses are only up x34 in dollar terms.

Edited by AvidFan

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  • 145 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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