Since Queen Elizabeth II was born, in 1926, the bank interest rate was 5% and there were only 500,000 mortgages held compared with 11.1m today. Things have changed so much, to put it into context the value of £1 then would be worth £55 today.
The average UK house prices have risen from a modest £619 to £291,504 (based on the latest Office for National Statistics figures). This represents an incredible 471-fold increase over 90 years – implying a 47,021% rise in average UK house prices.
To illustrate this 471-fold increase, imagine a 65cm pot plant, which could easily fit under a kitchen table, growing into a giant tree taller than London’s Shard standing at a dizzying 306 meters.
The reason for the phenomenal growth is that we are an overcrowded island with a growing, wealthy population who have an ingrained desire for home-ownership. This increase in demand then meets a rigid wall of fixed supply that compounds the pressure on house prices to rise. Lack of new build homes continues to be a pivotal issue and until more homes are built more house price rises are inevitable.
Comparison with other investments
There is no doubt that average UK property prices over the Queen’s 90 years of life have risen significantly, making residential property purchases a top performing investment.
If the £619 invested in an averagely priced UK property in 1926 was instead invested in UK equities, it would have risen to £72,952 by the beginning of 2016. A 118-fold increase, equivalent to an 11,685% rise.
If invested in gold, it would have risen to £127,051. A 205-fold increase, equivalent to a 20,425% rise (gold was £4.25 an ounce in 1926, and is at the time of writing £876 per ounce).
Over the period the UK’s cost of living index rose by 5,413% implying that £619 cash in 1926 would be now worth £34,105.
A shopping basket – 1926 vs. 2016
The following table shows how the cost of five supermarket shopping trolley items have changed over the past 90 years:
It is interesting to note that, if the price of a 250g pack of butter back in 1926 had risen at the same rate as house prices, it would now cost £24.97 and one kilogram of cheddar cheese would cost £61.26!
Of course the only real way to gauge values is how long it takes a worker to earn the price of a loaf of bread.
Source: ONS 1926 and February 2016 comparison
