It is often discussed whether property makes a good long-term investment, whether it be purchasing in your home country, or overseas property investors purchasing property around the world.
Now research from the Switzerland-based Bank of International Settlements (BIS) seems to have confirmed the answer beyond reasonable doubt.
The BIS researched the impact of short-term interest rates on property prices across 47 countries (advanced and emerging economies).
The research also considered whether property is a ‘good long-term investment’, covering property prices in the 47 countries over the last 50 years.
Somewhat unsurprisingly, the conclusion from the research was an unqualified ‘yes’ as property prices rose by nearly 7 per cent each year across 20 advanced economies.
The top performing economy for property price increases over the last 50 years was Spain, where housing prices increased by an average of 9.9 per cent annually.
The UK came in not far behind in second place with average annual property price increases of 9.3 per cent.
Tied in third place with average annual increases of 8.8 per cent came New Zealand and Italy, whilst Ireland made up the top 5 with an average annual increase of 8.7 per cent.
The research also found that short-term interest rates were a surprisingly important driver of housing prices.
The report’s authors, Gregory Sutton, Dubravko Mihaljek and Agne Subelyte, said: ‘One striking feature of house-price growth is its persistence. With the exception of Germany, Portugal and Switzerland, advanced economies have seen real house prices growing by an average of at least 6 per cent per year for 40 years or longer.’
Upswings and Downswings
The research also analysed ‘upswings’ and ‘downswings’ across the 47 countries.
Upswings were defined as periods of three years or more, where property prices increase. Whereas downswings were the exact opposite, when housing prices fell for a period of at least three years or more.
Upswings were found to be far more common and last longer than downswings, lasting on average 13 years.
The longest upswing has been seen in Australia, still going after half a century.
Upswings accounted for almost 80 per cent of the periods analysed, whereas downswings in property prices made up only 8 per cent of the advanced economy sample, lasting for 5 years on average.
The longest downswing experienced by an advanced economy was for a period of 13 years in Japan.
Emerging economies such as Brazil, Mexico and Malaysia had upswings for about two-thirds of the time, with upswings lasting on average for 8 years compared to 4 years for downswings.
In addition to Australia, just four other countries were found to have never experienced a downswing of three years or more during the last five decades. Namely, Canada, New Zealand, Switzerland, and Sweden.
The overwhelming conclusion from the research was that property around the world is indeed a good long-term investment. Time for domestic and overseas property investors to get those wallets out.