House prices have had a relatively quiet decade

It may surprise you to learn that house prices in Wales, Scotland and the north of England are actually more affordable than at the end of 2009.

I’m spoiled for choice when it comes to topics this week. There’s the effect on the markets of the headline-grabbing coronavirus. There’s Britain’s exit (at last!) from the European Union, which may already have happened (at least, if you’re reading this after 11pm on Friday, I hope it has). We’ve covered what’s next – and the investment implications – in this week's cover story. But instead I thought I’d write about everyone’s favourite subject – house prices

What caught my eye this week was a report from Nationwide building society on how UK house prices have fared decade by decade since the 1980s. I have to admit I was surprised by the data. It turns out that, despite appearances to the contrary – particularly given the sheer level of popular discontent that high house prices appear to have caused in the decade since the financial crisis – the 2010s were relatively subdued in terms of house price inflation in Britain. UK-wide prices rose by an average of around 33%, whereas they more than doubled during the 2000s. Indeed, in terms of price gains, the 2010s were more like the 1990s (another decade during which the UK was recovering from a house price boom and bust).

But what was unusual is the level of divergence across the country. In the 2000s, house prices doubled pretty much everywhere. Indeed, areas outside London and the southeast saw the biggest gains – Yorkshire and Humberside saw average prices rise by 137%, while London lagged on a mere 111%. But in the 2010s, while average London prices rose by 66%, in Scotland, they gained just 8%, and in the north of England just 11%.

That’s had a big effect on relative affordability. Indeed – and again this surprised me – house prices in Wales, Scotland and the north of England are actually more affordable relative to the earnings of the average first-time buyer (as defined by Nationwide) than at the end of 2009. This was not long after the price crash induced by the financial crisis, so that’s quite a striking statistic in itself. But in London, houses have gone from being barely affordable (above six times average earnings) to despair-inducing levels (just under nine times). Given that most big media outlets are located in London, you can see why broadsheet columnists have been handwringing quite so vigorously about wealth inequality – it’s their offspring (or maybe even their own pockets) being hit hardest .

So what do the 2020s hold? Could the Conservative Party’s efforts to focus on building the “Northern Powerhouse” trigger a catch-up for house prices outside the southeast of England? We can’t rule it out. It would be nice to see an end to the UK’s addiction to the property rollercoaster, and the resulting government interference in the housing market. But being pragmatic about it, juicing house prices is a much quicker and easier way to make people feel rich than building a high-speed railway that might take ten years or more to come to fruition.

That said, I think there are going to be easier ways to make money in the 2020s than trying to take a punt – yet again – on UK houses. And for ideas as to where to start, Mike Tubbs looks at how to track down what many consider to be the Holy Grail of stockmarket investments – the potential ten-bagger.

Recommended

High street giant HSBC to close 114 branches
Personal finance

High street giant HSBC to close 114 branches

HSBC is to shut the doors of 114 branches as more customers switch to online banking.
30 Nov 2022
House prices expected to fall by 5% in 2023
House prices

House prices expected to fall by 5% in 2023

House prices could fall by 5% next year as rising mortgage rates weigh on buyer demand.
30 Nov 2022
The best offers for switching banks – get up to £200 free cash
Personal finance

The best offers for switching banks – get up to £200 free cash

Looking to move bank accounts? You can now bag as much as £200 for switching current accounts from two major banks
30 Nov 2022
Stock market crash? This time it’s (slightly) different
Stockmarkets

Stock market crash? This time it’s (slightly) different

The bears expecting a stock market crash have got it wrong, says Max King.
30 Nov 2022

Most Popular

Wood-burning stove vs central heating ‒ which is cheapest?
Personal finance

Wood-burning stove vs central heating ‒ which is cheapest?

Demand for wood-burning stoves has surged as households try to reduce their heating costs this winter. But how does a wood burner compare with central…
29 Nov 2022
Fan heater vs oil heater – which is cheaper?
Personal finance

Fan heater vs oil heater – which is cheaper?

Sales of portable heaters have soared, as households look to cut their energy costs. But which is better: a fan heater or an oil heater? We put them t…
21 Nov 2022
Best regular savings accounts – November 2022
Savings

Best regular savings accounts – November 2022

You can earn an attractive rate on the best regular savings accounts. We tell you the best on the market to take advantage of right now
29 Nov 2022