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Evolution of the housing market

As STL Group celebrates its 30th anniversary this year, looking at home buying statistics from 1974 to now seems appropriate. The topic of house prices is never out of the news: house prices soar; dramatic rise in interest rates; no hope for first-time buyers; gentle slowdown to UK&#39s housing market – the headlines go on. But looking at the bigger picture over the past 30 years, the statistics make for interesting reading.

The first figure sure to alarm is 1502.02%. This is the amount by which house prices have increased over the past 30 years. Looking predominantly around the South East area, a typical flat purchased in 1974 for £10,000 would now be worth £160,202. A Surrey house bought in the same year for £20,000 has now reached £320,405 in value.

It is obvious to most of us that over the years general inflation would cause an increase in product and material prices. After all, nobody expects to go to their local shops now and purchase weekly groceries for anywhere near the price 30 years ago. However, the housing market seems to have been the leader when it comes to increases, with the average house in Surrey now being worth £279,515 compared with £10,990 in 1974.

Buy-to-let Accompanying the increase in property prices over the past 30 years has been the surge in the buy-to-let market. Overall buy-to-let lending now accounts for more than 7% of the residential mortgage market, with lending at nearly £20bn last year compared with only £3.1bn in 1999. This represents an annual average growth of 58% – and that&#39s only over four years.

This escalated growth in the buy-to-let market is mainly attributed to investors turning away from the stock market and cashing in on the property boom. Also, mistrust of traditional investments such as pensions, coupled with a strong rental market and a sustained period of low interest rates, have made buy-to-let an attractive option for many thousands of small investors.

MIRAS Before 1974, Mortgage Interest Relief at Source was introduced for the interest on the full amount of a loan of any size. Just fewer than 11 million loans qualified for relief and around 10.5 million loans were active within the scheme, operated by mortgage lenders who recovered the tax relief from the Inland Revenue.

After the property market collapsed in the late 1980s the MIRAS process underwent scrutiny and a government re-think. It was decided in 2000 that MIRAS should be abolished. Mortgage interest relief had been progressively reduced over the years from 1988 when restrictions on loans that qualified for relief were introduced. The government knew the phase-out would be a lengthy process, nonetheless. Overall, the number of mortgages from 1974 to 2000 had increased 42% from 4,910 million to 11,452 million.

Even today there are around 1,200 mortgage lenders that provide loans under MIRAS resulting from previous agreements, ranging from large banks to local authorities.

The majority of lenders will be relieved at the abolition of MIRAS. It was felt that the scheme was a cause of heavy administration and lengthy processes as well as a massive financial burden on the industry.

Technology As the economy moves on, so does technology and the growing expectations of the consumer. New developments have all stemmed from new technologies and a desire from consumers for the homebuying process to be made simpler and quicker.

From 1974 to the present day, the provision of property searches has shifted from the major data providers – the local authorities and Environment Agency – to private companies. This has been service, price and data-led. Environmental searches which cost a few hundred pounds 10 years ago and took weeks to produce are now available online for a fraction of the cost.

Research commissioned by STL Group recently found that nine out of the 10 top mortgage lenders now accept fast-track personal local authority searches – searches carried out in a matter of days by visiting a local authority and gleaning data from public records rather than writing to the council direct. Some 93% of all property transactions could now be completed using a personal search. In 2003 this would have equated to 1.24 million mortgage transactions.

In 2002, the Council of Property Search Organisations (CoPSO) was founded by the larger search companies and environmental data providers to provide a regulatory body ensuring the quality of private searches and setting minimum levels of professional indemnity insurance. It also acts as a pressure group contributing to the debate on the reform of the homebuying and selling process.

E-conveyancing This is the latest buzzword in the industry, allowing Land Registry documents and property searches to be requested and delivered online and enabling the transfer of funds electronically. The Land Registration Act 2002 paved the way for these developments, along with increasing the amount of property and types of leases that must be registered at HMLR. The aim is to reduce costs whilst dramatically speeding up the homebuying process for both consumers and lenders. All searches can now be dealt with in a matter of days as opposed to weeks, as in previous years.

Home information packs The most revolutionary idea in the reform of the homebuying and selling process is the introduction of the home information pack, set to dramatically change the buying process in 2007. This is another proposal designed to make the process quicker and easier – and also tackle the problem of gazumping. The aim is to provide all key information including local searches and a survey known as the home condition report at the start of the buying process rather than piecemeal as the sale goes through. Currently, nearly 30% of transactions fail after terms have been agreed, many due to the lack of this information at the outset. The government aims to make HIPs compulsory by 2007 though estate agents, conveyancers and search providers are already gearing up to supply such packs on a voluntary basis.

But although change in the market is bound to continue, one thing is certain – it would be a brave man who would predict the price of an average property 30 years from now.

How homebuying times have changed

• House prices have increased 1502.02% in the past 30 years

• Buy-to-let now accounts for 7% of the residential mortgage market

• The number of mortgages between 1974 to 2000 increased by 42%

• Nine out of 10 of the top mortgage lenders now accept fast-track personal local authority searches

• E-conveyancing allows searches to be completed in a matter of days rather than weeks


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