Why has the UK House Price to income ratio increased significantly in the last 30 years?

14 comments

1. Partly because of population increases and automation.

   Population rises, housing stock barely does. That vastly increased the demand for housing.

   Population rises, automation eliminates some jobs- creating less demand for workers and high wages

2. What’s even more interesting is looking at [longer term data](https://d2csxpduxe849s.cloudfront.net/media/469BA343-4BDA-4DA8-82EFE0F61A0F858A/A88A4923-D4F8-48BD-A0CAC789B94A59B2/webimage-FBDD8628-43B7-49A3-9E60205B3A1F9411.png)

3. Combination of factors, but mostly houses are in short supply. Around the 80s the government introduced Right to Buy and made other changes that made it impossible for councils to build and retain social housing stock.

   Private enterprise has zero incentive to build more houses and haven’t picked up any of the “slack” lost from council housing – they benefit from increased prices and gain no benefit from selling more at a lower price. While there has been some legislation to encourage building affordable housing, poor definitions of “affordable housing” and developers basically getting away with simply not building the amounts of affordable housing they’re supposed to have neutered these.

   Combined with population growth, an increasing number of people are chasing a decreasing number of properties.

   Widely available social housing helped to set a benchmark for rents and the increase in rental properties as a proportion of all properties means rents influence the value of properties.

   Government incentives such as help-to-buy (loans and ISAs) and stamp duty reductions (many of which have been needless) have achieved nothing but push up prices further.

   A large proportion of MPs are landlords or have links to house builders – they have very little incentive to help anyone else.

   Wages have stagnated for pretty much all but the top-level workers, with outsourcing to cheaper countries and importing cheap labor helping to push wages down.

   This hasn’t been helped by the government repeatedly giving public sector workers lower-than-inflation wage rises.

   And that’s probably not nearly everything.

4. housing benefit has inflated the rental market severely.

   On the face of it, it sees like a good policy, but ultimately it just inflates rents if you dont supply more housing as demand rises in an area.

5. Because land is the only thing you can’t make anymore of.

6. The dollar leaving the gold standard, also giving the responsibility to the Bank of England to set the interest rate, with a inflation target of 2 percent, while taking house prices out of the index.

7. People keep paying. If people stop paying, prices stop going up.

8. There are loads of factors the main 3 in my view are

   – interest rates. Until very recently interest rates have had a long term downtrend since the 1980s. Lower interest rates increases the values of all assets. Credit terms also fall in this category (i.e. more low deposit mortgages)

   – female workforce participation. To be clear this is good for society, but ultimately the ratio of house price to average income has gone up in part because more households have 2 incomes and can afford to bid higher.

   – supply constraints and demographic changes. We don’t build enough, mostly due to overzealous planning. However household demand has also increased fast with immigration, increase in sole habitation, increased divorce. In short the average household size has decreased whilst the population has grown. It’s a double whammy.

9. We had 16 houses built at the end of our road, all high-end and high priced. The developer built nine, avoiding the need to build affordable housing, then sold the rest of the land to a new company he’d just started and built the rest of the high-end high-priced housing he’d always planned to.

10. Boomers

11. Cheap credit and lack of housing stock

12. I think around 2004/5, you had more European countries join the EU, so with the increase in emigration, comes increase in demand thus pushing price of property up.

    Also, University student intake increased substantially, when universities became more of a business. So when you have an increase in student population, you get a lot of investors buying housed and converting them to HMOs. How does this increase house prices? Well if alot of houses are being snapped up by investors /landlords for HMO conversion, there are less actual family and single professional properties to buy and rent. Thus if there is a shortage of these, it pushes up the value to buy or rent.

    The other arguments people have posted are the main drivers absolutely, I.e not replacing social housing stock lost in the 80s, house builders not bulging affordable housing, etc.

    To add, there are thousands and thousands of empty properties in the UK – owned by landlords who are lazy and just sit on them because they can’t be arsed to sell or hope they’ll just increase in value. Do whilst there is a housing shortage in general, there is am abundance of empty properties sitting there not on the market.

13. Cheap money has made prices go through the roof. People thought nothing of borrowing vast amounts, pushing prices up at completely artificial rates.

14. A factor is that before 2000, it was typical for a house to be bought by a single income. Houses cost 3.5x a single income.

    Since 2000, it is by far the norm for a family home to be bought by two working individuals. The price is houses has become 3.5x two incomes, which on a chart like this looks like 7x one income.

    This didn’t happen in one year, of course. It’s been an underlying trend probably from 1990 through to 2005.