What was the main driver of the 300%+ house price rise from the mid 80s to mid 00s

zygurat789

increased availability of credit

People want houses so the demand is always there, however, as we have seen recently, there has not been the credit available to finance this demand so prices fell. Therefore credit is the reason for the increase.

System

All of them, plus a big culture shift towards dual incomes

ukcarper

Surely the price of a first time buyers property is governed by the amount they can borrow so if they can only borrow 3x salary property price is that + a reasonable deposit so if its 5x salary its correspondingly higher.

Really2

People buying houses at ever increasing prices.

CLAPTON

Supply and demand of course determines the price (demand meaning financially able and willing to purchase)

However it is largely a tautology and doesn't explain either the factors of supply of the factors of demand or whether prices will rise or fall.

The picture varies over the country but one factor that is very different about housing than other products is that many (especially first time buyers) will pay whatever they can borrow for a house (as opposed to what they perceive they can afford in terms of repayments)

So if they were buying a car they may well be prepared to borrow but probably not at the limit of avail credit; however, for a property many FTB (and others ) will borrow whatever mortgage companies will lend (hence the 5 x combined salaries and 125% of valuation).

So in most parts of the country the availability of credit drives the price that people are willing to pay... obviously there are factors like deposits and help from parents but on the whole the far largest part is what they can borrow.

What they can borrow depends largely on lenders... once upon a time only the man's income was counted and then it was only posssible to borrow 2.5 x salary; now both salaries (if relevant) are counted.

It was virtually impossible for friends to buy together but now quite possible.

So the 'demand' bit that says 'financially able' is increased by the lenders willingness to lend to a wider number of customers and at higher income multiples.
The demand bit able being 'willing' is largely influenced by local population size, cultural changes (single people wanting a place of their own, rise in student numbers), commercial perception (e.g. BTL ), holiday homes etc.

So demand has (both willingness and financially able) has risen damatically but supply........

Now the question of WHAT they can buy.

As there was a lot more money sloshing round one would expect the price to go up (and it did) and what the supply..

Well the supply didn't rise much as the planning laws in the UK are so restrictive.
Its virtualy impossible to build in a national park irrespective of the demand from locals (un-elected quangos determine the level of building); similarly in the green belt is virtually impossible to have new builds.
In towns planning laws restrict the type of housing (affordable and social) and there in anyway only a limited amount of land available (notwithstanding all the talk there once was of brown fill sites)
And of course much of the selling of houses is discretionary... e.g. people retiring who want to down size won't sell unless the price is 'right' so are willing to wait years to sell as they expect the price to rise again.

So there you go.


Basically to reduce prices you need to
1. build more properties
2. build more properties
3. build more properties

..
4. limit the amount of money lent

and things NOT to do
-special deals for 'essential workers' or any section of workers
-tax incentives like the old MIRAS
as unless it involves building more houses, any form of subsidy only increases the price and discriminates between different sections of society

Thrugelmir

increased availability of credit

Credit, Credit, Credit.

The day the banks discovered mortgage securitisation and using the Fractional Reserve Banking System created money. The die was cast.

In January this year there was a 3 part series on BBC , The City Uncovered by Evan Davies. Told the whole story from the early 90's through to the crash.

The Beeb should replay the series as very educational. Explains Lehmans, NR, even how the rocket scientists became involved in deriatives trading.

Emy1501

increased availability of credit

When I first bought in 96 you could only get 3X mortgage or 2.5 X Joint. Also hardly anyone was into BTL. My parents bought BTL's mainly in large properties with 6 flats or so in them. At the time they were the only landlords in the blocks they bought in.

Roll on to 2004 BTL are flavour of the month now 3/4's of my blocks my parents are in are BTL Selft cert is available but main lenders still only lending 3X Joint. Market stalls in 04-05. All of a sudden 100%-125% loans. 6X joint, Suprime and 90% BTL take off and so does the market.

puddy

less house building (reduced supply)

i said reduced supply, but would have also said increased demand too. im not sure i am totally convinced it was about credit availability on its own (did contribute) because you might say that for cars, how come easy credit hasnt shot the price of cars through the roof? because more are made (or used to be anyway)

C_Mababejive

comedy option

I think a major factor was the surge of house style type programs which pursuaded many people that they needed to

get on the housing ladder

improve and move

get into BTL

do up,take profit,move on

Prior to this,people did have some kind of expectation that their home would appreciate in value but it was not the prime mover for moving home for many.

A market and lifestyle was created by those who had an interest in it..they took the profit..and now they are smiling whilst others weep.

ukcarper

What caused the boom in the 70s I bought my first house in 1972 it was a new bild and at the beginning of the year the houses were £5400 I bought mid year for £8000 ended year ay £10,500.