When the credit cycle turned in 2007, many housing economists predicted an almighty crash. Houses would drop at least 30 per cent in value and probably more, they warned, because they were 30 per cent 'overvalued' relative to incomes. House prices plunged well below their average income multiple in the early 1990s; it was only logical that they should do so again.
In the end they only fell about 20 per cent. It turned out the income multiple was not all that mattered. Unprecedented interest-rate cuts, combined with bank forbearance, stemmed the wave of forced selling that drove the market of the early 1990s. Nor was there much oversupply, outside buy-to-let hotspots like Leeds.
'History does not repeat itself, but it does rhyme'. Often attributed to Mark Twain, this wisecrack is particularly applicable to property markets, which are cyclical, but not predictably so. The problem is that we inevitably turn to the previous cycle for guidance, either because we remember it personally or because the data is closest to hand. Note how commentators are now rushing to compare the current worries over US monetary tightening with the gyrating bond markets of 1994.
It was with the use and abuse of history in mind that I picked up The Property Boom, a fascinating account by one-time Investors Chronicle property editor Oliver Marriott of a long but long-forgotten cycle. Written in 1967, it traces the emergence of the post-war property industry, which has left the country with thousands of matchbox-shaped office blocks and a few large family fortunes but curiously little in the national memory bank.
Sometimes known as the 'Long Boom', the period of almost uninterrupted economic expansion that ran from the Second World War until 1973 was a golden age for developers. At first there was plenty of rebuilding to be done, and even after the bomb sites had been filled demand for offices from the rapidly expanding government proved insatiable. Money was cheap and plentiful. Mr Marriott complains of slow planning - some things never change - but there was no conservation movement blocking the demolition of old Victorian buildings (sadly, with hindsight). Eager for comprehensive high-street redevelopment but short of capital, local councils would lease land to developers on very long contracts at fixed rents - terms that looked absurdly generous as inflation eventually became a permanent feature of the financial landscape.
Above all, the post-war developers had limited experience of slump. The market was buoyant throughout the 1950s and only started to cool in 1963, judging by the performance of property shares on the stock market (data on values and rents was not collected systematically in those days). There was then another boom in the late 1960s. The first real bust came in 1973, after which rents did not mount a sustained recovery for a decade.
The Property Boom became something of an industry bible upon publication. Sam Rosen, who in the early 1980s co-founded Burford Group and more recently peer-to-peer property lender Relendex, says the book was an "inspiration" when he started out as a chartered surveyor. "I used to trawl through the company archives for information on the people in the book. It was very instructive," he recalls.
Mr Marriott's tales of easy riches no doubt chimed with the Thatcherite mood music. But the book's lucid analysis of precisely how development fortunes were made has also aged remarkably well. Companies like Great Portland Estates (GPOR) and Derwent London (DLN) still buy old offices - often built during Mr Marriott's boom, ironically; seek planning permission to rebuild or refurbish them, usually expanding the lettable floor area in the process; find a tenant for the bulk of the site; and finally either keep the finished product for income or sell it to an institutional investor. The investors are now more likely to come from abroad and the developments to include shops on the ground floor and flats in the roof - 'mixed-use' is in vogue. It is also more complex than it once was to obtain planning consents. Yet the essential business model remains the same.
What has changed is the names - both of the developers and their companies. The most famous bigwig of the Macmillan years, Jack Cotton, has slipped out of the property industry's collective consciousness, long since replaced by the likes of John Ritblat, Raymond Mould and John Whittaker. In fact, the only company still on the exchange to play more than a passing role in Mr Marriott's narrative is Land Securities (LAND), which was built up in the 1950s by Harold Samuel. Great Portland, set up by Howard and Basil Samuel, cousins of Harold, receives one mention. A Labour luvvie of his day, Howard part-owned the New Statesman. Mr Marriott is superb on human detail.
The book was reprinted in 1989, appropriately enough at the top of the second great property boom of post-war history. In the preface, Mr Marriott, who gave up journalism for the real-estate business in 1969 - semi-retired, he is now a non-executive director of Shaftesbury (SHB) - presciently noted: "It is a dangerous pointer in mid-1989 that the major banks, who have a sure knack of getting things wrong when in unison, have all been lending in rising volume on commercial property and with many ingenious 'new' kinds of loan." This could have been written in 2006 - a very close rhyme indeed. The ebb and flow of bank credit may be one element of the property industry that never changes.
