The value of Victorian houses roughly doubles every 10 years – so take a long-term view

The recent release of the REIV’s calendar year medians for 2011 allows another review of the long-term performance of the residential market.

It is commonly accepted that prices double every seven to 10 years and the REIV’s research shows that, while this does not occur every time, it is a reasonable rule.

The median price of a house in Melbourne was $540,383 in 2011. Since 2001 the median price has increased by $240,383, or 80%, from $300,000. Interestingly, because 2001 was a year of strong appreciation and 2011 was not, this results in a very different outcome from the 10 years to 2010, when prices rose by 120%.

This shows that the timing of the sale and purchase and have a substantial impact on the result.

In the 20 years since 1991, the median house price has increased by $398,383 or 281%. This shows that prices grew more strongly in the latter part of the ‘90s than they did over the last decade.

In the 30 years since 1981, the increase in the median was $484,783 or 872%.

The comparison with 1971, when the median house price was a mere $12,100, does not need a percentage comparison – the substantial change is obvious.

These comparisons confirm that residential property can deliver very solid investment returns over the long term. While many commentators concentrate on the short-, often very short-term changes, the more sensible approach is to take a long-term view.

Enzo Raimondo is CEO of the Real Estate Institute of Victoria.