The idea of mass home ownership is relatively recent thing. Even by the 1920’s, over 80% of people still rented from private landlords.
But city spaces have evolved as seen in SunLife’s then and now tool by SunLife. A London house that cost only a few hundred pounds in the 1930’s would now set you back almost a million. This brief history of property values will help you understand what explains this steep rise in prices.
The beginnings of private ownership
In 1930, there was a drive to build more housing, especially in the suburbs. There was also a rise in low-interest mortgages, meaning that many more people began buying homes. According to Nicholas Crafts, “85% of new houses sold for less than £750 (£45,000 in today’s money). Terraced houses in the London area could be bought for £395 in the mid-1930s.”
Over the next couple of decades, house prices rose by very little. By 1953, the average price of a house was still £1,8888.
House prices rose steadily through the 1960’s, alongside the cost of wages. In 1965, the average cost of a house was £3353 and the average wage stood at £960 a year.
The steep seventies
In the 1970’s, there was a ‘housing bubble’ in which the cost of buying a home soared from £4,480 in 1970 to £19,830 in 1979. The reason for this sharp increase was that the demand for houses vastly outweighed the supply. More and more people aspired to buy homes and with an increase in speculation and low interest mortgages, new buyers simply flooded the market.
The “Right to Buy”
In 1980, Margaret Thatcher reached out to the working classes by passing a law to allow tenants to buy council-owned housing. The “right to buy” was an aspirational slogan and those who could afford it flocked to buy their homes, creating another ‘housing bubble.’
Unfortunately, new council housing was built at a lower rate than it was sold off, contributing to a shortage of affordable and social housing. House prices rose by 16% in 1987 and a further 25% in 1988. By 1989, the average cost of a house was £61,514.
But this couldn’t last. Unemployment rates rose and many people had their homes repossessed. In the 1990s, housing prices dropped due to lack of demand and by 1995, a house cost, on average, £51,245. Prices slowly began to rise again, at the end of the decade.
The soaring noughties
Between 2000 and 2007, the average price of a home doubled, from £100,000 in 2000 to just under £225,000 in 2007. The economy was doing well and the cost of borrowing was low, just like in the seventies. But people’s wages did not increase alongside the cost of housing. This trend has continued and as such, it’s now more expensive than ever to buy a home.
We can’t help but remember the good old days, when housing was far more affordable.
If you enjoyed this article, you may be interested in this feature on the price of a home in Britain – then and now.