Are there hard limits to house price growth? This question sprang to mind a couple of years ago when an insurance executive told me his finance team forecast UK house prices would rise 3.8 per cent a year – above real inflation and wages – in perpetuity.
Unsustainable? In recent decades, growth on this sort of scale is precisely what has happened. Between 2002 and 2020, annual inflation and wage growth in England and Wales averaged 2.9 and 2.4 per cent, respectively. Meanwhile, house prices rose 4.8 per cent a year, while London’s annual house inflation clocked in at 5.8 per cent – despite starting the period with prices around double the national average.
More recently, however, the capital’s frenzied growth rate has slipped.