ZOOPLANOMICS' – THAT'S WHAT WE'RE CALLING IT.

Plenty of people are upset by this, judging by the online comments and the irate caller on the radio. But let’s take a breath and do a little maths…

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The average property value today is £292,000 in the UK (more like £744,000 within the Richmond Borough, including Twickenham and Teddington, but for the sake of maths, let’s just run through the exercise). If UK homeowners have achieved, on average, a £65,000 increase in their property value since 2004, it means that on average, property values then were £227,000. That’s almost a 30% increase.

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Nevertheless, let’s say annual inflation since then had only increased by the government target of 2%, year on year, and think about the compound effect of that:
Year 1 (2004), the property is worth £227,000. Add 2% annual inflation, and that brings us to £231,540 in year 2; plus 2% inflation again, that’s £236,171 in year 3…

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Scale this up to 20 years, and it should mean that a property today would be worth a little over £337,000 if property prices had simply kept up with inflation. £65,000 on average over 20 years, when a ‘target’ inflation rate should be putting it at £110,000, and it’s suddenly not quite the story it was – especially when you remind yourself that property ownership is hardly a cost-free endeavour. And we’re only talking about what it would mean if inflation had been on target these past two decades.

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We are not saying that homeowners have not benefited from bricks and mortar ownership or the capital growth that goes with it – it is, of course, a reason we are pro-property ownership (and why we want to see young people helped onto the ladder as first-time buyers). But the vitriol this news has prompted this week might just seem a little misplaced when put into context.

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