A new book on house prices has reached my desk, [amazon_link id=”1907994017″ target=”_blank” ]Safe as Houses: A Historical Analysis of Property Prices[/amazon_link] by Neil Monnery. It looks worth having for this chart alone (with apologies for the wonky scan but it is Friday afternoon):

UK real house prices since 1900

Obviously, the striking thing about this is the discontinuity of the historical experience since 1980. The book argues that, looking around the world over many years, real house price growth is typically around 1%. Certainly, one would not expect it to exceed the real growth rate of the economy for long periods, at least in a country like the UK with essentially a fixed supply of land and tight planning restrictions. However, the real growth rate in the UK has been 5% a year since 1995 even with the recent dip. If that trend were to continue, the average age of a first time buyer would rise from 37 now (it was 27 in 1995) to over 50 by 2025.

What are the implications? I’ll have to read the whole book to find out, but a period of zero to negative real house price growth seems very likely, with significant effects on home-owners’ wealth and on wealth transfers between generations. What’s more, in the UK mortgage debt is about 100% of GDP; have our banks really considered the risks attached to their mortgage portfolio? Given the events of recent years, it seems unlikely that the banks have been all that prescient.

Anyway, there is loads more interesting data in the book, including several countries and long time series.

[amazon_image id=”1907994017″ link=”true” target=”_blank” size=”medium” ]Safe As Houses? A Historical Analysis of Property Prices[/amazon_image]