From Bargain to Bank-Breaking: UK House Prices Then and Now

While the cost of living crisis has undoubtedly exacerbated the difficulties of getting a foot on the property ladder - already a daunting financial challenge to many - it can be difficult to acknowledge the scale of the problem in the housing market, particularly for those that have been firmly on the ladder for a long time.

Those who secured their first home many years ago may look at today’s economic outlook and property market and worry for their family members. When it comes to taking a step onto the property ladder in today’s climate our analysis shows that saving for a home without external assistance is an increasingly monumental challenge for today’s first time buyers.

Oak Tree Mobility has looked at the rapid rise in property values over the past four decades to compare the landscape for different generations looking to secure their own home.

The rapidly rising UK housing market

It’s no secret that property values have increased dramatically in recent decades, and for those who’ve had a foothold in the market for a long time, it may be surprising to see how high the barrier to entry is for first time buyers today. According to historical data from the UK Government’s House Price Index, the average property value in December 1982 was £22,685. That figure sounds like pocket change compared to the most recent publication in December 2022, which revealed the average house now costs £294,329.

The steepest rise in house prices came in the decade between 1992 and 2002, where the average cost to buy in the UK increased by 136% from £53,213 in 1992 to £125,747 in 2002. The slowest rise came in the following decade, with prices just 34% higher in 2012 than they were in 2002 - likely owing in part to the global financial crisis of 2008.

Since then, however, prices are rising faster. The latest publication of House Price Index figures from December 2022 shows a 74% increase since 2012. At no point has there been a consistent downward trend - great news for those holding assets in the market, but less ideal for those still looking to get on the ladder.

How property prices have outpaced earnings

Assets appreciate, and things get more expensive over time. A Freddo used to cost 10p, so what? Diving deeper into the economics, we can see how the increase in house prices is affecting the average person’s ability to secure a home.

Back in 1982, the average UK earner brought home £6,583.20 a year (roughly £21,500 when adjusted for inflation). Today, that average salary has jumped to a more impressive looking £32,760.

Unfortunately, that isn’t the only figure that has increased. Factoring in those aforementioned average property values means that in 1982, the average house price was just over 244% of average earnings. Fast forward to the modern day, that figure is close to 800%.

Even a deposit is increasingly insurmountable

As the gap between earnings and the cost of property continues to widen, owning a home becomes a distant dream for more and more people.

Back in 1982, a 20% deposit on the average property was equivalent to just over 8 months’ earnings. This may sound like a lot, but as of 2022, the figure stands at just over 21 months. Even if a prospective buyer somehow manages to save every penny they earn for almost two years, they still won’t have enough money to put down a 20% deposit without outside help.

Regional disparities are also stark. Even in the North East, where property prices are the lowest in England at £163,731 on average, buyers need to set aside a full year of earnings for the deposit on a home. Compare that to London, where the average property value is £543,099, and would-be buyers need to set aside almost 40 months’ earnings for the same percentage deposit.

London is also the region where values have increased the most over the past 30 years. In 1992, the average house price in London was £64,797 - a figure that seems unfathomable in today’s landscape. 

The capital has seen a whopping 738% increase in property prices in just three decades. This is considerably ahead of the next fastest risers - the South East, where values have shot 557%, and the South West, where values have increased by 547%.

Debunking the ‘stop buying lattes’ myth once and for all

It’s been a common argument that younger generations could afford housing sooner if they were to cut back on discretionary purchases such as lattes and avocado toast - this is money that should be saved for a deposit, not wasted on frivolous things!

We think this oversimplifies the issues - so to illustrate this, we’ve calculated exactly how many lattes a person would need to skip to cover the cost of a deposit.

Coffee industry analysts Allegra recently provided the average cost of a latte across the UK as being £3.25. Using this figure, a 20% deposit in 1982 would mean skipping 1,396 lattes, compared to a massive 18,113 coffee-less mornings required for a deposit today.

What might the next decade bring?

Across each decade analysed, there’s not been a decrease in values over preceding periods - in a decade marred by the global financial crisis, property values still managed to increase by around a third.

Taking each decade’s average percentage increase in property values to create an average and applying that to the coming decade, we can estimate that the average property price in 2032 will be a staggering £573,559.

When Gen Z and below look to fly the nest, this means a 20% deposit alone may be almost £115,000. Assuming a rate of one £3.25 latte purchased every single day, a prospective buyer in 10 years’ time will need to have foregone their usual morning coffee every day for the past 97 years to scrape together their deposit.