£30 billion: The price of a single city now and the UK’s total housing stock in 1952
30 May 2012
The unique nature of housing in the UK means that despite 4 cycles of boom and bust, house prices have grown by more than 250% over and above the general rate of inflation during the reign of Queen Elizabeth II. As a result the total value of the entire housing stock of the UK’s in 1952 now equates to the value of the housing stock in single cities such as Manchester (£25bn), Bristol (£30bn) and Glasgow (£31bn) according to new research from Savills.
During this time the cost of two of life’s essentials – food and shelter – have diverged hugely. While the average UK house price has risen by over 8,000% the price of food has risen by a more modest 2,300% with, for example, the cost of a loaf of bread increasing from 2.5p (6d) to just £1.35*.
“Over the past 60 years we have seen great changes in the way we view housing,” says Lucian Cook, director of research at Savills “Our demands on and requirements from housing have changed, meaning that it has become part necessity, part luxury and part investment.
“Combined with a mismatch between housing demand and supply and a shift to smaller households, this has meant that more of the nation’s surplus income has been directed at housing. As a result house prices have risen more in line with the standard than the cost of living, leaving the UK with an asset class worth a total of £4.3 trillion.”
2012 v 1952
Comparing the position now to 1952 Cook says, “General rationing has been replaced by mortgage rationing and inflation appears much less of a risk, meaning that it is currently difficult to identify the triggers for the next cycle of boom and bust.
“It shouldn’t be forgotten first 10 years of the Queen’s reign was a decade of austerity when house prices fell in real terms by 3%. It wasn’t until the early 1970s that we saw the cycles of boom and bust with take hold, with each subsequent decade recording significant real house price growth Periods of boom and bust have been interspersed with more stable price growth, causing the housing market cycles to increase in length in the second half of the Queen’s reign.””
Home ownership has peaked and it therefore seems unlikely that we will see a repeat of such dramatic recent price growth.
“In the short term our forecast is for real house price falls at a national mainstream market level, as inflation strips out price growth,” says Cook. “We expect these to lead to a period of much less spectacular house price growth than we have become accustomed to at certain parts in the housing market cycle.
“Future house prices booms and sharp corrections are inevitable but there’ll be a long wait for the next boom.”
* Source: Warburtons Ltd
Savills Berkeley Square
Savills Berkeley Square
+44 (0) 20 7016 3802