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Secrets from the Oldest Housing Index in the World

Updated: Dec 1, 2023

You can’t analyse the 18.6-year cycle using short-term data. Yet most real estate indexes only go back a few decades to the time when transactions started to be recorded digitally.

Some analysts have delved through historical archives to laboriously extract a longer series of data for various regional areas.

However, the one thing I want to tell you about today are the charts spanning 350 years of housing data.

That makes it an extremely valuable document for several reasons.

Few know of its existence, let alone its significance to the study of the 18.6-year land cycle.

It was put together by real estate finance professor Piet Eichholtz of Maastricht University.

Eichholtz was frustrated by papers that made assumptions on housing cycles with short-term data.

The problem is, most short-term indexes conclude that values in prime city regions go up significantly over time — the longer you hold, the better!

Who hasn’t heard real estate agents say, ‘It’s time in the market, not timing the market that counts.

Eichholtz set out to prove the opposite in a 2006 New York Times interview:

If you look at most research on real-estate markets, papers will typically say they are taking ‘a long-run look and then they go back 20 years. I wasn’t impressed with that. I thought you had to go back further to get a really good picture of what a housing market performs like.

The index compiled is called the Herengracht Index.

It follows the change in real estate values along a *prime strip* of the Herengracht Canal in Amsterdam.

What’s so special about t

he Herengracht Canal?

The Herengracht Canal is considered the most important canal in Amsterdam.

An address on the Herengracht is seen as a prestigious statement of wealth. It’s home to the city’s mayor, bankers, lawyers, and celebrities.

In the 17th century, the richest merchants lived along the canal.

The houses date back to the 1600s — an era when Amsterdam was the financial kingpin of the world.

To give some context’ before this, wooden homes were the norm.

However, almost all were wiped out by three major fires. This led to a ban on wood being used for construction, and from the 1600s onwards, only brick and stone houses were permitted.

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