How to be a property investor: a history of property prices

This is the second article in our ten part ‘How to be a property investor’ series. Make sure to read the first one, "How to be a property investor: our national love affair with property".

Back in 1980 the average home in the UK cost £24,000. Today the figure stands at £292,000. It’s no wonder property prices have become a national obsession.

These figures come from the Office for National Statistics (ONS). It found house prices have increased by an average of 6.9% per year since 1980 with 1988 seeing the biggest annual increase of 25.6%. It hasn’t all been an upward trend though – prices fell during the recession of the early 1990s and again in 2008-2009 after the credit crunch.

The ONS figures also show how prices in London have raced away from the rest of the country. In March 2016 alone the average property price in the capital increased by an eye-watering £30,000 – roughly £1,000 a day. That means if you live in London and earn the average UK salary (£27,600), and own the average home, your house earned more in one month than you did in a year.


Other data, this time from the Land Registry, shows how capital gains have varied across the country. For example, between 2010 and 2016 capital gains ranged from -3.7% to +13.8% per year across the UK.

The highest capital gains were in Inner London while Sunderland experienced the largest average yearly decline in house prices.

The ONS and Land Registry use “price paid” data when properties are sold, whether they are mortgaged or not, to track house prices. These indexes are arguably more accurate than those compiled by mortgage lenders, such as Nationwide and Halifax.

However, all the indexes tell us roughly the same thing – the past few decades have seen a massive increase in property prices.

Whether this is a good thing or not depends on whether you own your home. While some people have undoubtedly benefited from soaring house prices, those not on the property ladder are finding the dream of home ownership increasingly out of reach. Rents have increased and saving for a deposit has become much more difficult.

So why have house prices increased so much? It was in the 1980s when the Government, under Margaret Thatcher, introduced policies to get more people owning their homes. These included selling off council houses via Right To Buy.

Back in the 1980s and ‘90s it was much easier to save a deposit and get a mortgage with lenders typically lending three-and-a-half times a borrower’s income.


But a lot has changed since then. Subsequent governments have not built enough houses, demand for housing has increased and, for a time, mortgage lenders were happy to lend at high income multiples for high loan-to-value loans. 

Mark Harris, chief executive of mortgage broker SPF Private Clients, says: “Over time, property prices have tended to rise mainly because we aren’t building enough housing to cope with the growing population.

The growth of buy-to-let, which has encouraged a generation of people to become landlords, has also helped push up prices as investors have competed with first-time buyers and home movers for the same properties. An era of cheap borrowing has also helped fuel a housing boom with interest rates at record lows for the past seven years and showing no signs of rising anytime soon.”

Experts are predicting further house price inflation over the next few years. High-end estate agent Savills reckons prices will rise by 17% by 2020 while online estate agent Emoov predicts the average price of a home in England will be more than £450,000 by 2030.