House Prices Affected by Past Crises

by | Oct 2, 2023

Part 4 of a 5-part Series: What Have Past Inflation Crises Taught Us About Investing? 

By James Pearcy-Caldwell, Aisa Co-Founder and Compliance Officer, and Chris Lean, Chief Investment Officer 

House prices have been affected by policymakers and economic factors throughout history. In this discussion, we track the UK housing market since 1970 to illustrate how these factors affect consumers’ bottom lines.  

1970: Average UK house price £ 4,057 

Around 1/3 of the population is living in social housing provided by local authorities, which is an alternative to private home ownership.  

1980: £ 20,268 

Introduction of housing act (1980) – “right to buy” for tenants with turbo-charged discounts results in councils having less money to keep, therefore their ability to build new houses is crippled. 

1983: £ 24,522 

1985: £ 29,143

Under the initiative (from 1980) about 500,000 council homes are sold. 

1986: £ 33,103 

Throughout the 1980s there is deregulation in the financial sector. Subsequently, mortgages readily available, and lenders can charge whatever they want. 

1987: £ 38,662 

1988: £ 49,319 

Another housing act is implemented, enabling Householding Associations (HA) to source private money. For this reason, people start transferring to HA. 

1989: £ 58,887 

Interest rate rises to almost 15 % and the economy is in recession.  

1990: £ 58,162 

1990s’ subsequent fall, combined with high interest rates, leaves many homeowners with “negative equity”. This occurs when the value of real estate property falls below the outstanding balance on the mortgage used to purchase that property. 

1992: £ 55,053 

Easily available mortgages lead to high demand for houses. However, there is a lack of supply due to the low number of new houses. Both factors drive up house prices.  

1993: £ 54,121 

From this year, prices begin to rise. For example, mortgage payments go from 1/5 of first-time buyer pay packet/wage to 1/3 within 10 years.  

1994: £ 55,559 

1995: £ 55,939 

1996: £ 57,986 

Association of Residential lending agents and four lenders launch a “buy-to-let initiative” making it easier to invest in properties. This, falling interest rates, and rising house prices persuades investors that the property market is a good place to invest for the next two decades. Consequently, this adds to rising prices.  

1997: £ 63,085 

1998: £ 70,313 

1999: £ 77,961 

A new type of high-risk mortgage is introduced. Now, borrowers can take on debt equal to 125% of the value of the property

2001: £ 96,892 

2003: £ 130,164 

2005: £ 145,609 – £ 153,236 

Politicians are concerned over loans that do not verify the borrower’s incomes. Subsequently, new rules are made, as these kinds of loans are risky.  

2007: £ 185,196 

US Lehman Brothers files for bankruptcy and starts the global financial crash. Accordingly, UK lenders take risky products off the market and significantly cut their prices. This leads to mortgages being difficult to get, which pushes people into private renting.  

2007-2008: £ 176,853 

Credit crunch is felt across the country. However, repossessions are kept in check due to low interest rates and additional rules forcing lenders to do their best to help people keep their homes. Significantly, this made it possible for investors with spare cash to invest in property with “cheap credit”.  

2009: £ 161,148 

2010: £ 170,365 

A growing population, together with a low number of new houses built, leads to high demand for housing.  

Government announces “affordable rent”. This makes tenants pay up to 80% of the market rent (far above social housing rates), enabling more new house building. However, low-income earners struggle with high rent prices.  

2013: £ 172,890  

Launch of two “help to buy” schemes. In contrast, one independent budget economist warns that this will push prices up but will have no impact on demand.  

2012: £ 168,556  

2014: £ 186,770  

2015: £ 197,890  

George Osborne introduces some tax changes on landlords:  

  • Tax relief is cut from 45% to 20% by 2017.
  • There is no longer automatic relief worth 10% of the rent for wear and tear.
  • Additionally, a 3% surcharge on second homes is implemented.

2016: £ 211,725  

2018 -2019: £ 228,354  

Theresa May gets rid of council’s cap on borrowing, resulting in house building capabilities.  

2019: £ 230,612  

2020: £ 238,211  

COVID aftereffects.  

Using Average House Prices and comparing them to HPI 2015 is explained below (1) 

HPI 2015 compared to average house prices.Data seems to be valid if compared to OECD HPI index with base in year 2015.

To put it in economic context, the next chart shows Consumer Price Index (inflation) and Long-term interest rates: 

Comparison of interest rates, inflation, and average house prices.1. UK housing crisis: how did owning a home become unaffordable?

Image by Freepik

See also:

Economic Bubbles

Investment Performance and Solutions

Aisa International

Aisa International, s.r.o. is a wealth management firm with an award-winning team providing investment advice, financial planning, and asset management for U.S., U.K., and E.U. expatriate citizens residing abroad. Aisa International holds all current regulatory licenses, including the FCA license in the UK and the Investment License in the European Union. Therefore, Aisa International is uniquely qualified to provide personal financial advice for U.K. pensioners living outside of the U.K. Aisa International serves its global clients where they reside through its OpesFidelio network of highly-qualified advisors. For more information, please visit  

The views expressed in this article are not to be construed as personal advice. Therefore, you should contact a qualified, and ideally, regulated adviser in order to obtain up-to-date personal advice with regard to your own personal circumstances. Consequently, if you do not, then you are acting under your own authority and deemed “execution only”. The author does not accept any liability for people acting without personalised advice, who base a decision on views expressed in this generic article. Importantly, where this article is dated then it is based on legislation as of the date. Legislation changes but articles are rarely updated, although sometimes a new article is written; so, please check for later articles or changes in legislation on official government websites, as this article should not be relied on in isolation.

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Post written by:

James Pearcy-Caldwell

James founded and runs Aisa with an emphasis on a pro-client and transparent approach. He is always looking for the most suitable solution for the benefit of the client. He has been in the field of investment advice since 1998, and therefore fully understands the necessity of open communication and honesty. James is certified in many financial areas in several countries and also holds the most prestigious European certificate in investment planning EFP (European Financial Planner).

Aisa International is the only financial advice service company specialising in advice for expats that is regulated as a Securities Trader in the Czech Republic, USA, and UK.