An average house in the UK cost £72,985 in April 1979 (at today's prices - i.e. £1 is worth less now than it was then) when Thatcher came to power.
18 years later, a month before they were out of power, an average house cost £78,191 (at today's prices) - an increase of just over £5,000 in real terms in 18 years. Of course, house prices did go shooting up at the end of the 1980s (to a stratospheric £113,794 for an average house) but then they came crashing down again.
The peak of the house price boom in the Tory years was more or less exactly 10 years after they had been in power, then it was downhill virtually all the way back to where they were when they started in May 1979.
It would appear that the housing boom of the New Labour years has peaked after they had been in power for almost exactly 10 years, as well. According to the long term trend in house prices (over 40 years) the average house should cost just over £140,000 today. In fact is about £186,000 (at it's peak in 2007) - or 34% overvalued.
Just before the last crash in the Summer of 1989, according to the same long term trend, the average house was 35% overvalued (i.e. more or less exactly the same degree of overvaluation as today).
But when there is an asset bubble (i.e. overpriced assets like houses) they don't just return to the long term trend line but drop below it. In the last crash, the price of the average house dropped just under 29% BELOW the trend line at its lowest point in 1995 - six years after the peak.
If the same thing happened this time, then the price of an average house - currently just over £186,000 - would drop to £99,000 (i.e. 29% below the trend line) about 2013.
See: http://www.housepricecrash.co.uk/
© Andrew Hawkins 2008
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