Summary of UK property market
Labour Government (1964 – 1970
The ‘swinging sixties’ and the start of Beatlemania and the Mersey Beat sound. In 1964 Harold Wilson came to power with one of the smallest election victories ever recorded (Labour 317 seats, Tories 303, Liberals 9). When Wilson announced his cabinet he also announced 100 days of dynamic action – however this 100-day period was largely dominated by a major sterling crisis.
1966 saw England win the world cup. Also in 1966 the Labour Manifesto ‘Time for decision’ saw a housing target of 500,000 houses a year being set. Over this labour term in Government, Harold Wilson fought a second general election (1966) securing a larger majority. This term saw even harsher economic conditions, eventually resulting in the pound being devalued in 1967.
Conservative Government (1970 – 1974)
The 1970’s started with a backdrop of growing industrial unrest and escalating pay demands. In 1971 the largest ever political strike since the 1926 General Strike was seen, as 1.5 million workers protested against the Industrial Relations Bill.
The Government’s Budget (The Barber Boom) and the freeing up of the consumer credit industry contributed to the sudden rise in inflation and high wage demands. December 1973 saw the introduction of the 3 Day working week. House Price Inflation rose sharply and peaked in 1973 at over 36% per annum, a level never before seen in the UK (nor indeed seen since).
Labour Government (1974 – 1979)
Following the peak in 1973, house price inflation dropped sharply in 1974 and 1975. Inflation in the UK continued to soar, the FT30 fell below the 150 level and 1975 saw the worst ever year for share performance as the index more than halved. Home ownership was at around 53% and interest tax relief for mortgage payments was set at £25,000.
The economy in the UK took a new twist as the effects of North Sea Oil began to take effect. Inflation in 1976 was at 16% and continuing pay demands culminated in September of 1978 when a strike at Ford produced a pay settlement of 17%. The spiral continued, the engineering union asked for 33% and the miners for 40% – the public sector workers who were seeking parity on pay started their strike. The ‘Winter of Discontent’ had begun.
Conservative Government (1979 – 1990)
The backdrop of mountains of rubbish in the streets, the picketing of food deliveries to hospitals and the disruption to essential services saw a change in Government. The focus of using interest rates as a key economic policy to try to reduce inflation became evident during the 1980’s. Inflation at the start of the 1980’s was at 17%.
Margaret Thatcher introduced what has been seen as one of the major landmarks in the growth of home ownership in the UK. The ‘Right to Buy’ Policy, introduced in 1979, allowed tenants under certain conditions to purchase their council house at a price discount. By 1990 through this policy of selling off council houses, over 1 million additional people became homeowners. The love affair for owner occupation began to take hold.
Conservative Government (1990 – 1997)
Following the boom of the late 1980’s, the UK experienced a house price bust. Negative Equity affected over 1.7 million households. In 1990 the Government joined the European Exchange Rate Mechanism (ERM) and mortgage rates peaked at their highest ever level of 15.4% between March and November 1990. Membership of the ERM brought about new pressures and continued speculation on currency markets caused bank base rates to rise from 10% to 12% on September 16th 1992, with a further threat that they would move to 15% the following day. The Government left the ERM that evening.
The freedom away from the ERM allowed the Government to reduce base rates and they gradually fell back to 5.25% by 1994. House prices started to rise again and between 1993 and 1996 mortgage rates remained at below 8.5%. The UK was experiencing a period of low inflation and low interest rates.
Labour Government (1997 to date)
Labour came to power in May 1997 and immediately announced that control of interest rates would be with the Bank of England. Interest rates rose and bank base rates ended 1997 at 7.25%. Unemployment continued to fall during 1998, the housing market continued to rise, stamp duty on property transactions was increased on higher value properties. Inflationary pressures started to ease.
1999 saw a rapid rise in house prices, particularly in Greater London and the South East. According to the Halifax House Price Index, house prices in Greater London rose by almost 30% during the year and demand continued to outstrip supply. In the Budget of 1999, the Government announced that from April 2000, Mortgage Interest Tax Relief was to be abolished. Most recently, in his 2005 March budget, Chancellor Gordon Brown raised the stamp duty threshold from £60,000 to £120,000.
Commenting on the research, Martin Ellis, Chief Economist at Halifax, said:
“Homeowners have seen good rates of house price increases under both main political parties, just as they have seen real house price falls under both Governments. What is very clear however, is that home-ownership has been a tremendous success over the past few decades. The majority of people in the UK want to own a home of their own”
