Housing market has suffered before – but still prices rose 48-fold in 50 years

The past decade has mostly seen a moderate rather than spectacular rise in residential property prices. At the start of 2020, the average price of a home in the UK was just shy of £218,000, according to figures from Nationwide Building Society. That was a rise of about 36% from a 2010 average in the region of £160,000. In January, the market looked set for further progress.

Then COVID-19 hit the scene, causing illness and grief for individuals and disruption for businesses and markets. The property market suffered; instead of the hoped-for ‘Easter Bounce’ the market was all but shut down in late March by the national coronavirus lockdown. This precluded viewings and on-site surveys, delayed some completions and blocked prospective new moves.

Rural property sales disrupted

This was not the first time the UK property market had been interrupted by a virus outbreak. In 2001, foot-and-mouth disease affecting cloven-hoofed animals such as sheep, pigs and cattle sprang up in many areas, restricting rural property sales. Its impact was limited compared to that of COVID-19, but it was one of several events to hinder the progress of the market over the past 50 years.

Bearing in mind that Nationwide’s figures indicate an average house price of only £4,500 in 1970, it is worth looking at the general influences that affect housing market activity and prices. The most obvious are the forces of supply and demand that dominate virtually any market, but this is a complex market in which a range of factors may distort demand, supply or both.

Demand may be intensified by a rising adult population, but maybe dampened indirectly by official measures such a rent controls (removed in 1980), which may lead some renters to continue renting and also deter buy-to-let purchasers. Supply of homes to buy may be improved by increasing the pipeline of new-builds, which may in turn depend on financial or town and country planning issues.

Ladder’s slippery rungs

Wanting to buy and being able to enter the market can be two different things. For most of the past 50 years, getting on the property ladder has been quite a challenge, with saving for a deposit likely to take years without parental help and mortgage payments grabbing a big slice of ongoing income. Property price rises have often been facilitated by the availability of more and larger mortgage loans.

More money (some of it illusory because it stemmed from high inflation rates) chasing a slowly growing pool of properties brought an almost relentless rise in prices, with one or two notable interruptions. London has mainly tended to lead the way, but government plans to boost The North and move more civil servants there from the capital may help narrow regional price differentials.

So, just how did the average house price get from £4,500 to £218,000 in the space of 50 years, and what were the main interruptions along the way? Well, it got off to a rapid start during the inflation-beset 1970s, seeing a four-fold-plus gain to £20,000 with only a brief hesitation mid-decade. Thereafter, the first big setback didn’t occur until the tail end of the following decade.

Prices slumped in 1990 and 2008

By 1989 the average property price was over £60,000, but the market was overheating and big questions were being asked about affordability. The next three years saw prices slip to an average of around £50,000 and languish for two years more, but they began to recover in 1995. The 2001 foot-and-mouth impact was short-lived and prices climbed again to break through £180,000 by 2008.

The global financial crisis emerging in 2008 brought the average price down significantly, but it was back above £180,000 by 2014; then, onwards and upwards to £218,000. Much more about the housing market’s amazing journey since 1970 can be found in the latest addition to TOMD’s content for clients’ use; it follows in the footsteps of ‘Investing for the long term – lessons from the past’.