The cost of living crisis and rising mortgage rates haven’t put much of a dent in the property market yet, with Nationwide Building Society reporting that house prices are up 11.2 per cent annually.
It said last week that there were early signs that house price gains were slowing, but the average home will still cost you £27,000 more than a year ago, at £269,914.
In a piece of statistical serendipity, Nationwide added that 2022 marks both the Queen’s Platinum Jubilee and 70 years since it first compiled its house price data.
In 1952, the average UK house price was £1,891.
So, how much do you think that average home would cost if it had only risen in line with inflation? Look away now and have a guess.
The average house price has risen from £1,891 to £269,914 during the Queen’s reign since 1952, Nationwide Building Society’s index shows
The answer, according to This is Money’s historic inflation calculator, is £63,300.
Imagine an alternative reality, where buying the mythical average home would cost just over twice the UK median full-time salary of about £31,000, according to the ONS.
Just think about all the productive (and unproductive) things that you could do with the money you’d save by not having to raise the deposit and meet the mortgage payments required to pay 8.7 times the average salary for a home.
Consider too the alternative reality where the British economy hasn’t been totally skewed by sky-high house prices and a corresponding obsession with making money off property rather than living in it.
Wouldn’t it be great if moving home became something you did once you wanted to and felt financially able thanks to your income progressing, rather than feeling like a trip down the life casino as you borrow a few hundred grand and worry whether house prices rise or fall?
It’s a measure of how far detached house prices have come from our salaries and how contorted the financial system has become by cheap money, that the scenario where we’d only pay just over double average earnings for a home is almost totally unimaginable.
Mind you, figures compiled using slightly different salary data by Halifax show that not so long ago we weren’t that far off that: from the 1950s to the 2000s the house price to earnings ratio remained within a range of 2.8 to 3.4.
Interest rates were much higher but at least that and more cautious lending kept a lid on house prices.
Not to be outdone, Halifax also took a trawl back through the past 70 years of the UK property market. It put a figure on the average house price in 1952 of £1,725.
Since then, Halifax says that UK house prices have risen 300 per cent in real terms (measured above inflation), while London house prices have risen by 400 per cent in real terms.
The decade that saw the biggest rise above inflation was the 1980s, at 49.4 per cent, whereas the 2000s saw a 30 per cent increase – a figure dragged down by the post-2007 financial crisis crash, and most recently the 2010s saw a 21.8 per cent gain.
In the 1950s, house prices fell 7.2 per cent adjusted for inflation, before climbing 26.6 per cent in the 1960s and 27.2 per cent in the 1970s.
How housing tenure has chnaged since 1952, according to Halifax’s data from the ONS
The lenders both rightly point out that the housing market was very different when the Queen came to the throne in 1952.
In 1952, just 32 per cent of all households owned their homes, whereas the figure is 64 per cent today, although that’s down from the peak of 70 per cent in 2001. Rising property prices aren’t doing everyone a favour, obviously.
Meanwhile, Halifax points out that in 1952 about 5million homes had no indoor toilet. This fell to 2.5million by 1967 and by 1991 was under 1 per cent.
Presumably there is no more recent figure to cite, as without evidence of an outside toilet building boom that number became so low as to no longer count.
Halifax also points out that modern construction standards mean our homes are warmer and drier – they are almost certainly a lot safer too.
There’s no doubt that home buyers are getting a better product nowadays, the rise in the standard of living since the 1950s has been substantial, but even factoring that in it is a shame we must pay so much for them.
The long-term rise in British property prices over and above inflation is our perpetual cost of living crisis.