‘Zooplanomics’ – that’s what we’re calling it.

We’ve seen it on Zoopla, we read about it in the ‘i’ Newspaper a day later and we heard about it on a radio phone-in at the weekend: homeowners are “sitting on tens of thousands of pounds’ worth of profits” after property values have increased by an average of £65,000 in 20 years.

This news seems to have upset plenty of people, judging by the online comments and one particularly irate caller on the radio. But sometimes it can be worth taking a breath – especially when there is a little maths to think about…

The average property value today is roughly speaking £292,000 in the UK (and as a barometer for the nation’s house prices, Swindon itself and much of Wiltshire is not very far off that price). 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 does represent an almost 30% increase.

Nevertheless, we know that the price of most things goes up over time, through the process of inflation – something we have been hearing about a lot over the last year or two. In other words, we should expect the price of property to have increased – just like everything else. The question to ask is, has property outperformed other things? Let’s take a look: let’s imagine, for example, that annual inflation had only increased by the government target of 2%, year on year, for the past two decades, and explore what the compound effect of that would be:

Year 1 (2004), the property is worth £227,000. Add 2% based on ‘target’ annual inflation, that brings us to £231,540 in year 2; plus 2% inflation again, that’s £236,171 in year 3… and so on.

Scale this up to 20 years, and it should mean that a property today were worth a little over £337,000, had property prices kept up. £65,000 ‘profit’ on average over 20 years, when a ‘target’ inflation rate should be putting it at £110,000, and suddenly it might not seem 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.

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