A house sale in Wanaka was in the news recently. The owners bought it in 1968 for $7,500 and sold it for $820,000. That's a pretty nice capital gain. But:
Sunday, August 3rd 2003, 6:38PM
by The Landlord
• It's not as amazing as it seems.
It works out an annual rate of 14.4 per cent, which is high but not astounding.
• It could give readers false hopes.
Such gains are unlikely to be repeated. In the first 20 years that the couple owned the house, inflation averaged 11.6 per cent a year.
In the last 15, it was only 2.5 per cent. And inflation seems highly unlikely to revert to the levels of the 70s and 80s.
Just as importantly, this has been singled out as a remarkable gain. Such stories grab the headlines. But let me tell you about two house sales that didn't make the news.
