The benefit of compound growth is that you can earn interest on interest. So if a property rises in value over subsequent years, you will earn interest on the previous price growth as the property continues to increase in value.
For example, if you buy an investment property for $400,000 and it increases in value by 6% every year, after 10 years the property will be worth $716,339.
Beneficially, the more time that passes the higher the compound growth will become.
So if you hold the same property for 20 years and it increases in value by 6% every year, it will be worth $1,282,854.
So in this scenario, the compound growth from years 1-10 is $316,339, but from years 11-20 the compound growth is $566,515.
Therefore, for investors who are seeking capital growth, it can be advantageous to take a long-term view.