Owning property can be a great investment in the long term as prices rise. Certain factors may influence house prices along the way leading to fluctuations in the market, such as the stamp duty holiday, Covid-19, Brexit and low interest rates etc. but these may only have short term effects on actual prices.
Therefore we at Quick Property Buyer have decided to review the UK’s average house prices over the past 40 years and to apply the same growth rates to give an indication of how prices may rise over the next 40 years.
In this article we will look at:
According to the Land Registry, in December 1980 the average house sold for £20,897 compared to the average house costing £252,000 in December 2020. This amounts to a 1,105% increase.
Looking a little closer at these figures by reference to compound interest, the growth has been 6.42% every year for the 40 years since 1980 (accounting for interest on interest) . There would have been fluctuations within this time such as the rapid growth spike between 1985 and 1990 (with properties more than doubling in this period from £27,823 to £58,250) and the drops between (i) 1990 and 1995 and (ii) August 2010 and March 2011, but when assessed overall, house prices have risen by this 6.42% figure on average year on year.
If the next 40 years are the same as the last 40 years showing a 6.42% growth, the average cost of buying a house in the UK in December 2060 will be a whopping £3,036,202. This is hard for any of us to get our heads around. But at the same time if you said to someone in 1980 that houses will on average cost £252,000 in December 2020, they would have told you that you’re a lunatic.
To put in more detail, applying this 6.42% growth:
If this trend were to continue, this would mean the average house price would cost more than one million pounds by the end of 2043. So in 2060, will people be looking back to 2020 saying, gosh houses prices were so cheap back then.