Kurt Brouwer November 15th, 2007
Update: Some have taken to calling our current real estate woes a bubble and, in fact, real estate prices have been falling. See Home Prices Fall For Past 12 Months and Major Turning Point — Robert Shiller. However, no matter how rough our housing market is right now, it is nothing like the bubble that occurred in Amsterdam.
My ancestors, the Dutch, were ahead of the curve when it comes to financial innovations such trading in financial securities. But, they also experienced bubbles such as the famous tulip bulb bubble. There was also a real estate bubble in Amsterdam, on the famous canal, the Herengracht.
Justin Fox at Time’s Curious Capitalist Blog posted on an article he translated from a Dutch newspaper [emphasis added]:
House Prices on Amsterdam’s Herengracht Have Almost Returned To Their 1736 Highs (Curious Capitalist Blog, November 14, 2007, Justin Fox)
I missed this when it came out, but the NRC Handelsblad had a piece Saturday on the latest data from University of Maastricht professor Piet Eichholtz‘s famous index of house prices along the Herengracht in Amsterdam dating back to 1650 (translation mine):
The average house on the Herengracht now costs 2.6 million euros. That is, on an inflation-adjusted basis, just a bit less than in 1736, when house prices along the Herengracht were at their historical high. If house prices keep rising at their current tempo, the 271-year-old record will be tied in 2008…’
Eichholtz’s index is a favorite of Yale economist Bob Shiller, who sees it as evidence that real estate prices don’t always go up, and can in fact decline for centuries on end. Take a look at the chart, and you can see what he means…’
When you look at the chart (forgive the Dutch language headings), it is really astounding. This data goes back well over 200 years and yet, real estate prices still have not gotten to their high point from 1736.
Click on the chart to enlarge it:
Source: NRC Handelsblad
I believe this is the longest series of data we have on real estate values because it goes back to 1650. I’m sure there were lots of issues that went into these valuations from back in 1736, but it is still is quite amazing that, adjusted for inflation, real estate prices today in that neighborhood of Amsterdam still have not gotten back to their previous peak price 271 years ago. I’m sure anyone from that distant point in time would have been equally astounded that real estate prices stayed down for hundreds of years.
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