We all know, or at least we suspect, that UK house price inflation has been running at a far higher rate than the general rate of inflation since 1971, the year when decimalisation was introduced. You can relate to this when talking to house buyers who purchased property back in the 1970s and 80s when the gap between average wages and house prices was significantly narrower than it is today.
The fact is that in 1971, the average house price in England was £5,250 – contrast this with the average price in 2019 of £233,500 and this represents a rise of 4,447%!
Simply by using a measure of general inflation (excluding property) over the last 40 years or so and applying this to house prices over this period, the average house price should sit at £67,500 – 29% of what it actually is today!
Looking at wages, they averaged £2,000 per annum in 1971. Today, it’s £26,000 pa, which compares closely to the £24,000 pa it would have been had they also risen in line with general inflation. If they’d followed house price inflation, they would be standing at £88,000 pa today.
Just imagine what other day-to-day items might have cost had they followed the same route as house prices. Here’s a few examples…