Twenty years on – the winners and losers of Britain’s property boom
It is two decades since the great British property boom began. Since 1996, average house prices have risen by an extraordinary 281% across the UK, while in London the figure is 501%, according to the Nationwide house price index. Buy-to-let landlords have benefited the most, typically earning returns of £14,987 for each £1,000 they invested 20 years ago.
But few of the people buying or selling in 1996 could have predicted the huge financial impact their decisions would have on the rest of their lives. We spoke to those who purchased their property that year, but also people who got off the ladder and started renting instead. It is a tale of two Britains, where buyers have made millions and renters have shelled out tens of thousands of pounds and live a fragile existence.
In 1996 … Dagmar Noble’s building society began proceedings to repossess her two-bed terrace house in Didcot, Oxfordshire. It was sold for £55,000 – £12,000 less than she and her husband had paid for it in 1989 – and Noble has rented ever since, at a total cost of about £90,000. Now 63, she rents a one-bed flat in Weston-super-Mare for £420 a month. The house she lost is worth around £200,000 today.
We fell into mortgage arrears because we were in and out of jobs, and our commuting costs were high when we did find work. It was a stressful lifestyle and our marriage broke down. I was actually relieved when we lost the house. Since then most of my rent has been paid for by housing benefit.
It’s crazy, the increase in house prices over the past 20 years. But it’s not real money is it? The cash will never be in the bank unless you sell and downsize, or move somewhere cheaper – and then you can never move back to the area you used to live.
I’ve no regrets. I prefer renting to owning. When you rent you have greater mobility, and I’ve been lucky to have landlords who have sorted out any problems with the electrics and plumbing. Having experienced repossession I don’t feel there’s any security in buying.
But I don’t like paying someone else’s mortgage – I feel like I’m being taken advantage of. I’d rather rent a council or housing association property. I worry that a lot of people are being lured into buying property by low interest rates and will end up in negative equity, like I did. But I also think now is the worst time to be a private tenant that I’ve ever experienced, due to the cuts in housing benefit. I’d presumed that as a pensioner I’d finally be financially secure. But I’m not.
‘I count my blessings every day’
In 1996 … just a few miles away from Dagmar Noble, Ben Jones was moving into his new home, a two-bedroom Victorian terrace in central Oxford. He bought it for £80,000 with a £4,000 deposit, and has lived there ever since. Aged 50, three years ago he paid off the mortgage. The property is now worth at least £525,000.
I had been renting but decided to buy because I’m a nest builder and wanted my own home. But I wasn’t totally convinced property would be a good investment. Interest rates were high and £76,000 felt like a huge sum to borrow. When I hear how much people borrow now, it blows my mind.
An old house is a continuous project and I reckon I’ve spent about £5,000 a year maintaining and improving it. But I love living here and I just can’t believe how fortunate I’ve been.
But the money I’ve made from my property isn’t real. Everywhere in Oxford is expensive, and Oxford is where I want to live. I bought this house as a home, not as a way of making money. It would have made no difference to me if prices hadn’t gone up in the appalling way that they have.
I have a pension … money I will need to live on in my old age. The money in my pension is tangible – the money in my home is not.
‘I’m so lucky – but it was a big risk to buy’
In 1996 … Jonathan Downey bought a 1,500sq ft apartment near Old Street in central London for £218,000, with a £25,000 deposit. Last month it was valued at £1.5m.
I earned the £25,000 deposit working as a corporate lawyer in Abu Dhabi. When I came back to London in 1996 I was 30. I wanted to stop renting and buy my own place; somewhere I could make into a real home.
It was a big risk to buy near Old Street – there was nothing there, just a workers’ cafe and a Safeway supermarket. No one wanted to live there. I worried I might lose all my savings and end up in negative equity because I couldn’t really afford the self-cert mortgage; I maxed out three credit cards just to pay for the kitchen. I was very conscious of the recession just a few years earlier and that interest rates might go up. But the flat was so central I could walk to work. I felt at home there, and still do. I never think about how much it’s worth.
I was so lucky I bought the flat. By 1999 the increase in property prices enabled me to release £90,000 equity to invest in my business, Match Bar.
If I hadn’t, I wouldn’t have the business I do today [Downey is co-founder of London street food market networks Street Feast and London Union, recently valued at £24m]. It can all be traced back to that flat, which allowed me to grow Match Bar when I wanted to, and make it successful.
The flat also enabled me to buy my family house in Dalston, east London, for £750,000 in 2004, after I had kids. I released another £150,000 of equity from the flat for the Dalston house deposit and let the flat for 10 years at £2,500 a month before moving back in.
That £750,000 house in Dalston is now worth £2m. I owe £1m in interest-only mortgages across both properties.
As for house prices, I’m pleased my own kids have got a financial safety net, but it worries me that an entire generation of hardworking individuals isn’t going to be able to afford to buy.
The government has to start building houses and stop relying on private developers to build the properties that young people, key workers and families need.
London is being hollowed out by empty residential developments that only people in low-tax countries can afford.
‘We dismissed prices as daft and carried on renting’
In 1996 … Tim Woods and his wife Samantha sold their two-bed home in Cambridge for £72,000 and, like Jonathan Downey, moved to London. But unlike Downey they chose to rent, and initially paid £800 a month for a two-bed garden flat in leafy West Hampstead. In 2001, after spending £60,000 on rent, they bought a £325,000 cottage in Pinner, near Harrow, with a £50,000 deposit. Last year, they sold it for £645,000 and bought a five-bedroom house nearby for £999,995.
We made an £8,000 profit when we sold in Cambridge and thought we were quids in. We considered holding on to it and letting it, but we’d heard nightmare stories about tenants trashing houses and the hassle of getting them to leave.
We moved to London for Samantha’s job. We didn’t think we’d like living there so renting seemed easier. But we loved it. In 1998, we offered the full asking price of £180,000 for a three-bed garden flat in Islington. But the estate agent refused to put our offer forward because he wanted to sell to someone he knew, which I think would be illegal nowadays. We dismissed most central London prices and carried on renting.
In 2001, when we bought in Pinner, the house we’d sold in Cambridge was worth £135,000. Property prices had doubled in five years. Today, it’s worth around £350,000. I dread to think what that Islington property is worth now. If we’d bought it we would have been mortgage free by 2005. I do feel regrets. I’m 49 and have a massive £350,000 mortgage. I fell behind some of my peers in real terms. But even though it was the most expensive time to opt out of the market, renting was the right lifestyle choice for us at the time – and we count ourselves lucky we own our own house.