🏠 What is Capital Growth in Property?

Here’s a quick definition of capital appreciation in property…

Capital growth in property, (or capital appreciation) describes the amount in which the value of a property increases over time. 

Capital growth/appreciation can be expressed as a percentage or in absolute terms.

Capital Appreciation Example 

For example, if a £300,000 property rose in value by £330,000 you can say that this property had a capital appreciation of £30,000 (or 10%).

Capital appreciation is one of the ways that people look to conserve and build wealth in property over time because house prices in the UK tend to go up in the long term. 

How To Calculate Capital Appreciation In Property

To calculate capital appreciation in property you need to find the difference between the current market value and the original purchase price of a property. 

And remember you can do this in absolute £ terms or in terms of percentage change.

Capital Growth in Absolute Terms

So if the original purchase price of a property is £500,000 and the value today is £600,000 we just need to subtract the two. 

£600,000 – £500,000 = £100,000.

In this example, we have £100,000 in capital appreciation. 

Capital Growth In Percentage Terms

You can also work out capital growth in percentage terms as follows. 

( (New value – original value) / original value ) * 100 = percentage change (%)

( (£600,000 – £500,000) / £500,000 ) * 100 = 20%

This works out to a 20% increase in the property’s value. 

This means that the property has had a capital appreciation of £100,000 in absolute terms or a 20% increase in percentage terms. 

Capital Appreciation Calculator

To make it easy to calculate I’ve made this capital growth calculator. All you have to do is input the original value of the property and the current value of the property.

Capital Growth Calculator for Properties

What Is Capital Depreciation?

Capital depreciation is the opposite of capital appreciation and it describes the fall in the value of a property. 

Similarly to capital growth, you can express this in absolute terms or in percentage terms. 

Capital Depreciation Example

For example, if a £300,000 property fell in value to £270,000 you can say that this property suffered from capital depreciation of £30,000 (or 10%).

Further Reading

If you want to know how much capital growth you have in your properties, then using a house price index is a good place to start as they show you trends in house prices over time.

But remember that capital growth is only one part of the puzzle of property investing. Another benefit of rental properties is that rental growth in the UK generally beats inflation.

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