Home ownership is still the goal for most people in the UK, despite the high cost. For more than half of potential first-time buyers, becoming a homeowner is about achieving security, while more than a third see it as a way of preserving future wealth, as well as a smart investment move.
With all this in mind, it’s perhaps no wonder that the UK housing market manages to stay so resilient. Here’s a brief look at how it’s continued to defy the odds in spite of major events such as the 2008 financial crisis and a pandemic.
Evolution of the property market
It’s hard to imagine, but in the 1920s, most people rented with nearly 80% leasing property from private landlords.
The shift towards ownership can be partly attributed to the growth of house building which peaked in the 1930s. During this time, a staggering 350,000 private sector homes were built every year thanks to readily available land and labour.
The trend for building continued throughout the 1950s when local councils built 250,000 new homes annually. By the time the 1960s rolled around, there were just as many owner-occupiers as there were renters.
How have housing prices changed over the years?
The UK House Price Index records average house prices. Since 1968 when records began, the overall trend has been for property prices to rise – significantly so since the early 2000s.
The 1970s and 1980s in particular, were marked by housing price booms with values rising by up to 36% in the 70s. With right to buy in the 1980s, new homeowners saw property values steadily increase with two dramatic peaks in 1987 and 1988 when prices rose by 16% and 25% respectively.
Increasing value is a trend current homeowners are familiar with. In fact, according to the Office for National Statistics (ONS) average house prices have risen by nearly 7% every year since 1980.
For property owners that represents a healthy return, but wages haven’t risen to match, in real terms at least. In the 1950s, the average house price was around three times the annual wage, in the 1960s it was just over two and a half times. Compare that to today where the average house price is more than eight times the average UK salary.
How did the financial crisis affect the UK housing market?
The greatest drop in house prices came just after the 2008 financial crisis when prices fell by more than 7% in 2009. The knock-on effects of the crisis saw regulatory frameworks reviewed with mortgage applicants subject to greater scrutiny.
It took nearly six years for average house prices to reach pre-2008 levels but despite blips here and there, prices are still on a chiefly upward trajectory.
How has COVID affected the UK’s property market?
Although the first lockdown effectively shut the housing market down, COVID has had less of a negative impact on the UK’s property market than perhaps might have been expected.
Prospective buyers and the market itself were also buoyed by the Stamp Duty holiday. By Q4 2020, agreed sales were up 50% with homes selling more than two weeks faster compared to before the pandemic. Mortgage approvals also hit a 13-year peak at the end of 2020.
Today, as restrictions begin to ease and glimpses of normality come into view, the housing market continues to show resilience. Latest figures from the UK House Price Index show the average price of a property now stands at £250,772. It’s slightly down from March (-1.9%) but it’s a nearly 9% increase from the same period last year.
For many people, the pandemic has given them the opportunity to reassess their needs. Coupled with the fact hybrid home and office working is likely to stay, buyer priorities have changed and the types of property that have experienced the greatest value increases is significant.
Although flats and maisonettes have enjoyed a 5.4% year on year increase in value, semi-detached properties have seen their values increase by 10.1%, terraced homes by 9.5% and detached houses by 9.3%. Tellingly, Zoopla report that the most popular housing market search terms in 2020 were: garden, detached, rural, and secluded.
So, while it’s well known the housing market works in cycles of boom and bust, history shows us that the underlying trend shows resilience. For those potential first-time buyers looking for security, future wealth and an investment opportunity, it would seem they’re on the right track.
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