Gold trades currently at about €55 per gram. That's up from about €36 back in 2017. Gold was at €30 back in 2014, after having reached a temporary high of €44 back in 2013. This can be established by consulting a gold chart.
Historic house prices, on the other hand, are not so easy to find. Here, I have to go by memory. I remember an apartment in our building going for something like €66,000 back in 2014. This changed to about €120,000 in 2017, and the price is now at about €240,000.
Going farther back in time, we can note that my wife bought her flat in 2005 for €140,000. That translates to 12.7 kg, with the price at the time at €11,000 per kg.
When we relate these prices against gold we get the following for a three bedroom apartment in a quiet neighbourhood of Porto:
- 2005 - 12.7 kg
- 2014 - 2.2 kg
- 2017 - 3.3 kg
- 2022 - 4.4 kg
Measured in gold, the price of my wife's apartment is still down 2/3 since she bought it, even if it's up by 80% in nominal terms.
However, prices of apartments in Porto have outperformed gold since 2014. But house prices aren't 3.6 times higher than they were in 2014, as it may seem from the nominal price of apartments. The current price of an apartment is two times what it was back in 2014.
Where prices are heading from here on is not self evident. I sold my house in Asker, Norway for 16 kilogram of gold back in 2017. It wasn't a fantastic house. A fair swap would be for a good three bedroom apartment in Porto which traded for about 3.3 kg back in 2017.
This means that my house was about 13 kg overpriced relative to prices in Porto when I sold it. However, I didn't profit wildly from this. I bought my house for 1.7 mill NOK back in 2004, which translated at the time to 14 kg. My profit was no more than 2 kg.
A corresponding house in Asker is currently going for about 14 kg. Prices in terms of gold are back to where they were in 2004. They are still in bubble territory, and they haven't continued up, as it may seem from looking at nominal prices. The trend has been downwards over the past five years.
We have the following data points for a modest house in Asker, Norway:
- 2004 - 14 kg
- 2017 - 16 kg
- 2022 - 14 kg
On the face of it, I'm only 2 kg better off having sold my house in 2017 rather than now. However, this ignores the fees and taxes associated with the house. These fees amount to about 200 gram every year, which I would have to somehow cover. Since I wasn't renting the house out, and would probably struggle to do so if I tried, we can add 1 kilogram of savings into the above calculation. That puts my profit at 3 kilograms of savings that I would otherwise have lost out on.
It's clear from this that house prices wary greatly depending on place and time. It's also clear that house prices aren't going up as fast as it may appear by comparing nominal prices. Prices in Norway are down from all time highs, even if nominally higher by quite a lot. Prices in Porto on the other hand are up by 30% since 2017, and 100% since 2014, while remaining down by 60% since 2005.
The historic norm is for prices of houses in the above category to fluctuate between 1,5 and 9 kg . But Norway proves that prices can go well above this range, and stay there for a long time.
If our sole goal of buying a house is to profit from it in real terms, it's probably wise to avoid purchasing a typical three bedroom flat for more than 5 kg. However, if the goal is to live in the house, other factors play in. The house we live in is not merely an investment. It's a lifestyle. Seeing that we may have to wait twenty years or more for a good deal to come along, we might risk never buying the house we want for ourselves out of greed and/or fear.
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| Reflection in a soap bubble |
By Brocken Inaglory. The image was edited by user:Alvesgaspar - Own work, CC BY-SA 3.0, Link
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