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£8 a pint & the worlds most expensive chicken: Understanding the UK’s house price Madness

Understanding the UK House Price Madness

£8 a pint and the most expensive chicken in the world: Understanding the madness of UK house prices

A chicken walks into a bar. The bartender says, ‘Sorry, we don’t serve chickens here.’ The chicken says, ‘That’s fine, I just want a pint.

The total price of that joke in 1971 was £1.33; a little more if one counts the emotional cost of having to listen to it. Things were considerably cheaper then. A pint set you back 15p. A healthy-sized chicken weighed in around £1.18. The average house price in February 1971 was £4,265.

Of course, 48 years later UK house prices are less funny. Latest UKHPI figures put the average cost of a house at £226,234. That’s an astonishing rise in value. If we applied the same rate of inflation to everyday goods our joke would now cost £70.54.


Applying House Price Inflation to Grocery Prices


Grocery prices if they had increased at the same rate as house prices


If grocery prices had increased at the same rate as UK house prices since 1971, then:

  • A pint of beer would cost £7.95
  • A dozen eggs would cost £12.19
  • A chicken would cost £62.59
  • The average weekly expenditure on food for a family of four would be £552.14
  • A loaf of sliced white bread would cost £5.30
  • A 4-pint carton of milk would cost £12.72

                                                                                                                                                       Adapted from england.shelter.org

1971 was not an easy time. Social unrest and the highest inflation rate for 30 years created a lot of uncertainty. ‘And pain is all around,’ sang Simon and Garfunkel in their iconic hit released that year. But there clearly was a bridge over troubled water, because by the end of the decade house prices in the UK had quadrupled.

Such dramatic shifts in the market are a strong thread in the history of the UK housing market. But what has caused them? And how do we find ourselves in the current situation, in which young people with deposits still can’t buy homes?

In order to answer these questions we need to travel back in time: to before Paul met Art, to before turtlenecks and bell-bottoms and to before Ziggy found his Stardust.


Average house prices UK 1959-2019 barchart


Now we know the average prices let’s take a look at the years in a little more detail including some interesting facts about each era.


1950s

Average House Price (1959): £2,410
Top Invention: Super Glue

The 1950s saw the UK housing market trying to stick itself back together.

The years after World War II were, understandably, defined by a housing crisis. New home building had ceased during the war and half a million homes had been destroyed by bombing. An estimated 3/4 of a million new houses were needed, and needed fast.

Part of the solution lay in prefab homes . These types of houses could be built in 40 man-hours. The first went up a few weeks after the war. They were new and well-appointed, with hot water and heating, earning the term of endearment, ‘people’s palaces.’ Over 150,000 prefab houses were built to combat the housing shortage. Some still stand today.

This is when council-house building peaked, with 250,000 new local authority homes erected a year. One million new homes were built between 1945 and 1955. This expansion was absorbed by existing towns like Hemel Hempstead, Harlow and Crawley, or the founding of brand new towns like Cumbernauld in Scotland and Milton Keynes in England.


1960s

Average House Price 1969: £4,640
Top Invention: Etch a Sketch

The 1960s drew a steady picture of UK house prices rising in line with average income. These were not, however, the only things rising. Part of the post-war housing solution that emerged in the 60s was the tower block: residential high rises full of the mod-cons of the time, including colour TV.

Supply was finally beginning to catch up with demand too, with private and public house construction topping out at 400,000 new houses a year. This increased supply with a concurrent rise in real wages meant that real house prices stayed affordable, resulting in increased home-ownership and a decline in renting.


1970s

Average House Price (1979): £19,925
Top Invention: Rubiks Cube

The 1970s saw the housing market puzzle solved for many new homeowners. The decade started at an average house price of £4,975 and ended at £19,925 – an astonishing rise and the first boom since the war. House price inflation peaked at 36%, but with low interest rates and more available mortgages the percentage of homes owned steadily increased. Though average income was also rising, the Himalayan growth curve of house prices saw the gap between income and UK property prices expanding dramatically for the first time. Houses remained affordable, but barely.


1980s

Average House Price (1989): £54,846
Top Invention: MTV

In the 1980s Video Killed the Radio Star, and Margaret Thatcher killed unaffordable council housing. Right to Buy was a gift to the aspirational working classes who were given the opportunity to buy their council homes at discounted prices. However, succeeding generations might not thank Ms Thatcher for the policy. This was the Lawson Boom, and it caused a surge in British property values. Prices almost doubled in five years to end the decade at £55,000, further opening the gap between real wages and the cost of buying a home.

As council homes were sold, government investment in house building slowed down. Although there was some growth in the private sector, this would take a sharp turn in the 1990s.


1990s

Average House Price (1999): £92,521
Top Invention: Texting

The house price crash of the early 1990s sent a clear message: every bubble eventually bursts. After a short period of tremendous property price inflation, the period between 1989 and 1995 saw the average price of a UK home drop by almost 15%. Interest rates soared, making mortgage payments suddenly unaffordable, causing a decline in sale values. Repossessions hit record numbers and unemployment doubled. ‘Buy my house please’ was a common phrase around this time but for most people purchasing a home was not possible.

The crash impacted house supply too. After the crash, the number of privately-built houses fell to 150,000 a year, well below the growth rate required for new households.

However, by the end of the 1990s the UK housing market had begun its recovery, ending the decade with an average house price of £96,340.


2000’s & Onwards

Average House Price (2019): £229,681
Top Invention: Facebook

From the turn of the millennium to the mid-2000s, the local property market looked more and more like someone’s facebook feed – all happiness and holidays. The population was growing. The economy was growing. Credit was easy to come by, but houses weren’t – there had been a sharp fall in the number of new homes being built. Together, these conditions contributed to the UK’s third big housing bubble since 1945. The average house price more than doubled from £101,550 in 2000 to £223,405 in 2007.

Then 2008 came. The global financial crisis ended the boom and sent the UK into its worst post-war recession, which would eventually last for 15 months. During this period house building fell to its lowest peacetime level since the early 1930s.

UK house prices bottomed out in 2009 after collapsing by 19.6% in 16 months. According to the UK House Price Index  (UKHPI), February 2009 saw house prices at £155,417. However, with prices so inflated before, this did not mean first time buyers had an easier entry into the market, especially as mortgages became harder to secure.

Fast forward ten years and the market seems to have recovered. At its peak in August 2018, the average UK house price was £232,046 – an almost 50% increase. This value was, however, significantly skewed by the weight of London and the South East, highlighting the uneven regional growth in the housing market.

Regardless, prices have been falling ever since.


What Now?


And so we arrive at the present day. Much has been made of the latest statistics showing UK house price growth falling to its weakest level since 2012. Even though the average house (£226,000) still costs 7.6 times the average national salary (£29,588 per year), is this the sign of house price inflation in this country beginning to fall in line with the other costs of our lives?

Will our theoretical chicken finally pay a fair price for his pint?

It’s complicated. A lot of the slowing down in house price growth has been attributed to Brexit and buyer uncertainty. But there are other factors at play and we’ll take a look at 5 of them now.


5 factors affecting uk house prices right now


Let’s see what else we can learn by taking a closer more in depth look at these 5 factors below.


1) Economic Growth Rate


Economic growth is a factor of and a contributor to house price changes. The UK GDP growth is expected to dip to 1.1% in 2019. Lower growth equals lower income equals lower ability to buy houses equals lower demand equals lower prices.


2) Interest Rates


UK interest rates are sitting at 0.75%, with the last increase happening in August 2018. The Bank of England is waiting for the outcome of Brexit, but another increase looks probable later on. Higher interest rates mean higher mortgage payments, which usually result in a drop in house buying demand.


3) Consumer Confidence


This is the Brexit Factor. Consumer confidence in the UK continues to shake as Brexit continues to shake. More than any other factor, consumer confidence is currently directing housing market trends.


On the bright side once Brexit is resolved this can be expected to resolve relatively quickly.

4) Mortgage Rates


After the contraction of the mortgage market post 2008, in which mortgages became far more difficult to obtain, things seem to be easing again, especially for first-time buyers. A decade on from the financial crisis mortgage rates in the UK have halved. Competition for new borrowers is increasing, as is product availability.


5) House Supply


The UK is under-supplied in housing. In an environment where mortgages are available and appetite to buy is strong – as is likely to be the case once Brexit is resolved – insufficient housing supply will keep prices high. Estimates suggest between 240,000 and 340,000 new homes are needed in England each year. In 2017/18, the total housing stock in England increased by around 222,000 homes – a 2% increase on the year before but still lower than estimated need.


A Final Word


The UK property market is currently facing many issues so it’s hard for anyone to predict which way the tide will turn. Prices have always fluctuated up and down in the UK but right now it does look like property prices are struggling which suggest they will continue on a downwards turn.

Ultimately it will come down to how fast the UK can sort out issues like Brexit & housing supply. If these problems can be solved it will go a long way in improving customer confidence which in turn will lead to a more successful property market.


Don’t Want to Risk Waiting for House Prices to Increase?


If you’re someone who is doesn’t want to take the risk of waiting for house prices to stablize and are looking to sell your house fast, Housebuyers4u may be able to help.

We here are at Housebuyers4u are a genuine cash buying company and have completed thousands of quick & fair cash house sales which have brought comfort and stability to the lives of people who have sold their homes with us.

We guarantee to buy any house in any condition within 7-14 days irrespective of your financial situation so if you’re looking to sell up and move on fast, get in touch with us today!


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