@RandomLondoner
Something I read looked at several explanations for the rise in house prices in the UK and found that the biggest explanatory factor was lower interest rates. Surprisingly, they found there was actually slightly more housing availability now than 2 or 3 decades ago, the housing supply had actually increased more than the population. (So, while more housing always helps, a shortage of construction does not explain it being harder to buy now.)
Something I read looked at several explanations for the rise of house prices in the U.K. and found the biggest explanatory factor was lower interest rates.
I remember as a teen in the 80s being utterly convinced I would never, ever own a property. With double figure interest rates and soaring prices, there was real fear in the air with houses becoming increasingly unaffordable. This lasted in the late 80s with a peak in 1989 of 14.88 percent and heralded in a monumental crash, made worse by the removal of the double tax relief for unmarried couples.
I think perhaps a lot of mumsnetters either weren’t born or cannot remember this time. It was scary and nothing like 2008. Interest was in the higher single figures shortly before the 2008 property price crash and the drops were around 16% in 2008 and 1.3% the following year. Whereas the previous owner of the house we bought in 1994/5 paid more than 1.5 times more a few years earlier, ie a drop of just over 35%.
Additionally, people had to save to get on the ladder as there were no 0% deposit mortgages (albeit with a higher interest rate) until 2014. There were no government ftb stamp duty allowances or shared ownership properties. Obviously the interest rate for these mortgages is higher. However, these elements have all boosted demand and driven up costs.
If today someone pays an interest rate of £900 a month, they can borrow around £180k. In 1997, a rate of 7.7% would have allowed for £120k and a rate of 15% in 1989, £70,500. This is very relevant in terms of house prices.
It is hardly surprising when putting these factors together that prices have soared.
The Tory government is only too happy scapegoat btl landlords, who saved their bacon when it sold off swathes of housing stock. However, the government has allowed oligarchs to purchase massive amounts of housing stock, particularly in cities such as London and launder billions, which had a serious impact on London property prices. It’s the equivalent of what people do to little kids when they tell them to look over there and steal their toy in jest. Except this is not a game.
Rents in my experience at least have not yet doubled in the past 20 years. They have gone up a lot recently due to governmental policies targeting landlords with one or a handful of properties. Notably the largest change has not affected those with the old property businesses and portfolios. A lot of government ministers own such portfolios. Another ‘look over there’ trick.