House prices since 1845 have seen a roller coaster of price changes from the Victorian and Edwardian era, through two world wars which then led to the post-war boom. During the period of 1845 to 1920 house prices declined consecutively which then seen a rebound after 1920. House prices are often described as very expensive now standing at 8 times wages, however dating back to the earlier period they were 13 times wages. There were three contributing factors during this period which was more houses were being built outstripping demand including smaller houses being built and rising incomes.
The Bank of England house price index shows from 1845 to 1960 the market barely grew. Then once Thatcher came into power the property market has entered a boom period ever since and the shift from renting to owning property was desirable and affordable through right to buy schemes. The Bank of England document recently published shows cheap credit has been a major contributing factor to long-term property inflation. Affordability has declined as higher prices need ever bigger deposits which can cause problems for people unable to secure bigger mortgages. This has led to a decline in home ownership which now stands at 63.8%.
The government is coming under pressure to fix the housing crisis and as a result yesterday the cabinet reshuffle was explosive. The housing minister was sacked which was expected but most shockingly the Chancellor Sajid Javid resigned and was replaced by Rishi Sunak. The country faces the biggest housing problems due to a shortage of homes not helped by the constant turn-over of housing ministers. This is getting to the point where they will have little impact to finding the solution as the government has had 10 housing ministers in 10 years. The chance of the property market going into reverse such as the period from 1845-1920 is very slim long term, until Britain starts building more homes which outstrips demand. All eyes will be on the next budget to see if the new Chancellor pulls a rabbit out of the hat.