Page last updated at 10:29 GMT, Wednesday, 20 January 2010

Houses 'are less affordable' than 50 years ago

Margaret Thatcher in 1959
Margaret Thatcher became MP for Finchley in 1959

Houses are less affordable than 50 years ago although the quality of homes has improved, according to the Halifax.

The lender, now owned by Lloyds Banking Group, said that over the last five decades UK house prices have risen by 2.7% a year, allowing for inflation.

This was above the 2% annual increase in real earnings over the same period.

Prices increased the most in the last decade, and separately lenders warned that lending to first-time buyers would be constrained for "some time to come".

Own or rent

The Halifax study considered the state of the market in the half-century from 1959 to 2009.

LIFE IN 1959
Harold Macmillan in 1959 with wife Dorothy
Harold Macmillan led the Conservatives to General Election victory - two years after telling the country they had "never had it so good"
Elvis Presley and Bobby Darin both had two number one UK singles
The price of the average UK home was £2,507
About 14% of homes did not have an inside toilet

"The last 50 years have witnessed some remarkable developments in the UK housing market," said Martin Ellis, chief economist at the Halifax.

Margaret Thatcher was voted in as MP for Finchley in 1959, and it was her government's Right to Buy policy when she was prime minister in the 1980s that brought about one of the most significant shifts in the market.

Owner-occupation in the UK accelerated the most in the 1980s. The Halifax figures show that 43% of homes were owned by their residents in 1961, compared with 68% in 2008.

Privately rented homes fell from 33% to 14% over the same period, although it has crept up in the last 20 years or so, probably owing to the increase in student numbers.

Boom time

Four big house price booms have occurred in the last 50 years, the research concluded. They were: 1971-73, 1977-80, 1985-89, and 1998-2007.

Over the last 50 years, the biggest rise in prices was in greater London, whereas the smallest increase was in Scotland. This might have been mitigated, to a degree, by an increase in homes with two incomes rather than just one.

In a sign that buyers might be getting more for their money now, the proportion of households without an inside toilet fell from 14% in 1960 to 0.2% in 1996.

A basic hot water supply features in all homes, unlike 22% of them in 1967, and central heating has also become the norm.

Although getting on the property ladder might have become more difficult, the rise in prices would prove that homes have been a good long-term investment for some people.

The average home has almost quadrupled in value, having risen by 273% since 1959 in real terms, the Halifax found. In today's money, a typical home would have cost about £43,000 in 1959.

Bill McClintock, chairman of the Property Ombudsman, has been in the housing business for 50 years and said he bought his first home - a four-bedroom house in Winchester - for £3,400 in 1965.

"Even back in the 60s people aspired to own their own home," he said.

First-time buyers

House building levels have fallen, but the proportion of households that were occupied by just one person rose from 19% in 1971 to 33% in 2009, the Halifax said.

Modern houses in Rotterdam
Modern houses are different to styles 50 years ago

This is likely to have added to pressure on affordability of smaller homes for first-time buyers.

The Council of Mortgage Lenders (CML) has said that the proportion of the average first-time borrower's income spent on mortgage interest payments dropped in November 2009 to its lowest level for six years, at 14.4%.

However, the deposit demanded by lenders remained high - typically at 25%.

"The requirement for large deposits is likely to continue to constrain the market - particularly first-time buyers - for some time to come," the CML said.

Meanwhile, the National Association of Estate Agents said that there had been a seasonal slowdown in sales in December but a recovery over the last 12 months. However, it still wanted more assistance from the government to help prop up the housing market.

"Thousands of potential buyers are still in need of help and further, more robust, action is needed to make mortgages more available," said NAEA president Gary Smith.

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