A house bought some years ago for 100K earns 5K each year. That's rent minus costs of ownership (maintenance, electricity, local taxes).
Today that house would easily sell for 150K. The rent and costs are more or less equal. How would I calculate next year's return? Would that still be 5% (5/100) or rather 3,33% (5/150)?
I said to my father, who claims it still 5%, that he's probably right according to some financial formula. I also told him it's not relevant to see it that way.
Consider that house would be sold for 150K, that money was used to invest differently and earn 4% on it. That would be 6K yearly. That's more than the 5K return on the house. The return on the house couldn't have been 5%.