Adjusting for inflation, the gains in house prices in the past four years are actually nothing special when viewed over a full 50+ year timeframe

Some readers have been looking for data on the ‘real’ change in house prices over a long time frame.

Their thought is that this will show how different the current sharp run-up in nominal prices the recent data is from historical precedents.

But it doesn’t look like that is the case.

Finding data over a long period is not easy. But Statsitics NZ has a Long Term Data Series where annual, national data can be sourced. It is available in their G.6.1 series from the AREMOS set. That runs from 1989 to 2004 but can be accuratelty extended by an earlier index of the same series, and a later reference to REINZ data that accurately mirrors the AREMOS data.

The full 1963 to 2016 series is listed below.

These median house prices can be adjusted using the RBNZ Inflation Calculator to derive ‘real’ 2016 prices.

The nominal run-up in house prices is familiar and quite spectacular.

Applying the inflation deflator and recalculating all prices to 2016 levels does smooth out some of the rise.

But when you look at the annual change in real house prices, you find that current increases in fact seem quite ‘normal’ in New Zealand’s history.

Go figure.

Here is the data for these charts.

Real house price inflation
  Stats NZ RBNZ    
Year LTDS CPI adjustment ‘Real’ ‘Real’
  G.6.1 assume Q2 2016 price
  based on AREMOS   price change
  NZ$ nominal Index NZ$ % pa
         
1963 6,171 40.98 252,888
1964 6,454 39.78 256,744 1.5%
1965 6,964 38.41 267,473 4.2%
1966 7,247 37.18 269,432 0.7%
1967 7,643 34.93 266,970 -0.9%
1968 7,700 16.86 129,816 -51.4%
1969 8,039 16.03 128,870 -0.7%
1970 8,719 15.23 132,786 3.0%
1971 9,625 13.72 132,049 -0.6%
1972 10,927 12.77 139,534 5.7%
1973 13,701 11.87 162,629 16.6%
1974 19,249 10.80 207,890 27.8%
1975 21,061 9.39 197,760 -4.9%
1976 22,533 7.98 179,811 -9.1%
1977 24,005 7.00 168,033 -6.6%
1978 24,514 6.23 152,724 -9.1%
1979 25,816 5.55 143,281 -6.2%
1980 28,138 4.70 132,247 -7.7%
1981 34,762 4.09 142,175 7.5%
1982 45,575 3.49 159,057 11.9%
1983 50,161 3.23 162,019 1.9%
1984 56,615 3.08 174,374 7.6%
1985 64,598 2.64 170,538 -2.2%
1986 71,222 2.39 170,219 -0.2%
1987 83,337 2.01 167,508 -1.6%
1988 94,320 1.89 178,266 6.4%
1989 100,208 1.81 181,377 1.7%
1990 105,875 1.68 177,870 -1.9%
1991 106,000 1.64 173,840 -2.3%
1992 109,229 1.62 176,951 1.8%
1993 115,813 1.60 185,300 4.7%
1994 129,083 1.58 203,952 10.1%
1995 138,125 1.51 208,569 2.3%
1996 150,729 1.48 223,079 7.0%
1997 163,333 1.47 240,100 7.6%
1998 164,167 1.44 236,400 -1.5%
1999 168,990 1.45 245,035 3.7%
2000 171,813 1.42 243,974 -0.4%
2001 174,958 1.38 241,443 -1.0%
2002 186,500 1.34 249,910 3.5%
2003 211,971 1.32 279,802 12.0%
2004 245,896 1.29 317,206 13.4%
2005 283,167 1.25 353,958 11.6%
2006 311,375 1.21 376,764 6.4%
2007 345,458 1.18 407,641 8.2%
2008 338,125 1.14 385,463 -5.4%
2009 342,854 1.11 380,568 -1.3%
2010 352,500 1.10 387,750 1.9%
2011 354,708 1.04 368,897 -4.9%
2012 370,021 1.03 381,121 3.3%
2013 396,919 1.02 404,857 6.2%
2014 428,188 1.01 432,469 6.8%
2015 457,929 1.00 457,929 5.9%
2016 495,583 1.00 495,583 8.2%

As someone who was around in the 1960s and has memory of the period, the early prices above resonate as realistic to me.

Another thought: House prices are actually just a proxy for affordability. But they are not a good one because they are incomplete. Incomes, tax rates, and interest rates all have as much to say about ‘affordability” often more. And recently, we can add regulatory limits, like LVR standards.