UK house prices see a 130 fold increase over the Queen’s reign
House prices are more than 130 times higher than they were when Queen Elizabeth II ascended to the throne in 1952 (70 years ago), or almost four times higher (365%) when a taking inflation into account, according to research by property firm Savills, to coincide with the Queen’s Platinum Jubilee celebrations.
Savills analysis of how the housing market has fared over the past 70 years found that when the Queen came to the throne on 6 February 1952, the average house price was just under £2,000. This is the equivalent of £56,000 in today’s money, and amounts to house price growth averaging 2.2% per annum above the rate of inflation every year since the Queen ascended to the throne.
“House price growth over the past 70 years has meant that the nation’s housing stock has become a vast source and store of household wealth during the Queens reign. But the ability to benefit from this has largely ben dependent on the year you were born, meaning the capital appreciation we have seen through different housing market cycles has created a marked divide between the housing haves’ and have nots.”
“That means different generations now have very different views on the benefits of house price growth, how much new housing we build, where we build it and what is expected from housing policy,” comments Lucian Cook, head of residential research at Savills.
“Over the Queen’s reign there have been six periods where annualised price growth has been over 5% in real terms which have lead us to this point. While this has been punctuated by a series of relatively short-lived, but uncomfortable, downturns, the upswings have been magnified by a systemic undersupply of housing over the past 40 years. ”
Peaks and troughs: Housing market cycles
The beginning of the queens reign coincided with a major national house building programme, with no real sign of inflation-plus house price growth until 1958. That was followed by a period of economic volatility, that was closely matched by the fortunes of housing market through the 1970s and early 1980s.
The first pronounced period of sustained inflation-adjusted house price growth coincided with Thatcher’s dream of home ownership (Q2 1982 to Q2 1989). This was initiated by the introduction of the Right to Buy in 1980, and facilitated by the introduction of MIRAS (Mortgage Interest Relief at Source) in 1983. Headline house prices increased by 79% over this period, even after an adjustment for inflation.
“This period fundamentally altered the way in which we looked at our home as a route to financial prosperity, fuelling the nation’s obsession with house prices,” says Cook
But the longest and most unprecedented upswing in values took place between Q4 1995 and Q3 2007. During this time the average loan to income ratio increased from 2.3 to 3.1.
“On a nominal basis, house prices increased by 87% over the 2001 to 2004 period alone. This created a sizeable wedge between those who were and weren’t able to get onto the housing ladder over this period. It is a divide which became entrenched in the post credit-crunch, age of mortgage regulation, and has been a catalyst for government intervention in the housing market, through schemes such as the soon-to-end Help to Buy” says Cook
How does today’s market compare?
“With inflation eating into households disposable income and interest rates on the rise, we expect to see a marked slowing in price growth as the current supply-demand imbalance eases over the remainder of this year. But the recent mini-boom has only just put prices back to where they were in Q3 2007 on an inflation-adjusted basis,” says Cook. “This reflects the fact that UK house price growth was relatively subdued immediately prior to the pandemic, despite the low underlying interest rate environment.”
“With a strong employment market, mortgage regulation having stress tested borrower’s ability to sustain rate rises and many having already locked into historically low interest rates, there don’t appear to be the triggers that have fuelled previous market downturns.”