The best investment is in your own four walls
It will come as no surprise to those searching for their ideal home that house prices are 135 times higher now than in the 1930s. Over the past 10 years, the rise has been particularly dramatic. The housing boom of the late 1980s saw house prices leap at a staggering rate. The average price of a house in the UK in 1990 was pounds 60,993, compared with pounds 27,027 in 1983 - a rise of more than 225 per cent.
But earnings - commonly used as a benchmark in measuring what size and type of house people can afford - have lagged behind. The average salary in 1990 was pounds 12,952, only 1.7 times higher than pounds 7,489 seven years earlier. And the pressure doesn't seem to be letting up. Many parts of the country are still enjoying a housing boom, making it difficult for first-time buyers to get a foothold on the housing ladder. As rocketing prices do not correlate with increases in earnings, saving for a deposit is becoming even harder. No wonder there are now so many 100 per cent mortgages on the market.
Potential buyers who fear another crash in house prices, similar to that seen earlier this decade, are delaying their first purchase, choosing to rent. But even this is not free from hassle. Since the 1988 Housing Act, rents can be freely set between landlord and tenant causing big discrepancies between the average rents charged in different parts of the country. In areas where rents are high, such as Bristol and London, people can find themselves trapped in a vicious circle. While mortgage repayments may well be lower than the rent they pay, they cannot buy a home because the bulk of the monthly wage goes on the rent, making it impossible to save for a deposit.
For landlords, this is good news. As a result, a growing number of people are turning into property investors because low interest rates mean traditional methods of investing are less attractive. Some mortgage lenders are responding to this demand by offering tailor-made, buy-to-let mortgages enabling investors to borrow up to 75 per cent of the house value.
In the UK, the number of people who rent is low compared with countries such as Germany. But this wasn't always so. At the turn of the century, only 10 per cent of British homes were owner-occupied - 90 per cent were privately rented.
Latest statistics show that the position has completely reversed: 67 per cent of houses are now owner-occupied, 10 per cent are privately rented and 23 per cent are rented social housing, including local authority stock. These figures vary regionally: in Welsh households, owner-occupation is higher than the national average at 71 per cent, while London has Britain's highest level of private tenants - 17 per cent.
The Halifax survey reveals that the move towards buying rather than renting began after the First World War. But it was not until the 1930s that it really took off. Rent restrictions were introduced, reducing the supply of rented accommodation so mortgage lenders, never slow to miss an opportunity, leapt on the bandwagon by encouraging home ownership.
One Halifax advertisement read: "There is a natural pride and satisfaction in owning one's home - particularly when such a valuable asset is being acquired by little or no more effort than renting."
Mortgage lenders have certainly done well out of the trend towards home ownership. In 1900 pounds 46m was owed to the industry as a whole. By 1930, pounds 45m was owed to the Halifax alone, while more than a thousand other building societies also provided home loans. The figure has since risen even more dramatically, with pounds 484bn now owed to the mortgage industry.
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