As Tony Blair’s term of office comes to an end next week, property website propertyfinder.com looks back over ten years in the Blair housing market…

1)       Low mortgage rates

Independence for the Bank of England brings the lowest mortgage rates in a generation.  The average mortgage rate for the Blair years was 5.9% compared to 8.8% for the ten years before him.

2)       House prices boom

Labour’s low inflation, low interest rate economy kicked off a 189% rise in house prices between May 1997 and May 2007.  The average house price rose from £68,000 in May 1997 to £197,000 at the end of Blair’s premiership.

3)       Mortgage borrowing soars

A typical home buyer borrowed £47,000 when Blair took office compared to £125,000 when he left.

4)       But so does housing equity

Over the same period, the average homeowner saw his equity grow a massive £74,000, from £29,000 to over £103,000, a rise of 254%. 

5)       Mortgage mountain grows

The stock of outstanding mortgages in the UK rose 162% from just £420billion at the end of the John Major’s time in office to a staggering £1.2trillion by the time Tony Blair’s ten years were up.

6)       First-time buyers decline

First-time buyers shrink from 45% of mortgage borrowers in 1997 to just over a third in 2007 as house prices stretch beyond the reach of many.  Affordability stretches such that the typical first-time buyer now borrows 3.3x income compared to just 2.3x ten years ago.

7)       Stamp duty brings smiles at the Treasury

The introduction of stamp duty bands and the speed with which house values rapidly moved up into the new bands made stamp duty a major earner for the Treasury.  In the year before Labour took power, stamp duty receipts in England and Wales were just £675m.  By 2006, they had hit £6.3billion and continue to rise.

8)       Cost of moving home triples

The overall cost of moving home for the average homebuyer and seller rose from £2,927 in the year before the Blair removal van arrived in Downing Street to £9,486 today.  As part of these costs, stamp duty per transaction rose from just £543 to a whopping £5,009.  By contrast, the average household income rose just 43%.

9)       Private rented sector rises

Buy-to-let emerges as a new industry.  Demographic change, rising student numbers, high immigration, and rising affordability constraints lead to an explosion in demand for rented housing.  Social housing provision remains static. Private landlords step into the market to fill the gap. By 2007, the private rented sector makes up 12% of UK housing stock and the level of owner occupation begins to fall for the first time in two generations.

10)          Housing market remains unreformed

After ten years in office Blair’s government failed to simplify and speed up the notoriously awkward process of buying a home in England and Wales.  Home Information Packs were repeatedly diluted and delayed until an embarrassing collapse just ten days before their final planned introduction on 1^st June 2007.

Warren Bright, chief executive of propertyfinder.com commented: “The housing market has been extraordinarily energetic during the Blair years.  Homeowners and property investors have seen the value of their homes rise hugely, and have enjoyed an even bigger boost in the equity in their properties. 

”Unfortunately one of the side effects has been the increasing gap between the housing haves and have-nots with the bottom rungs on the housing ladder moving out of reach of many.  We estimate that 3.1m people who had expected to retire in their own home will live out their golden years in rented accommodation. 

“Although home owners have done well, the Treasury has been by far the biggest winner as the tenfold growth in stamp duty has far outstripped the rise in house prices.

“For the Brown years, we hope to see firm action to tackle the shortage of housing supply.  This will mean a commitment to building far more new homes to meet the housing needs of our growing population.”

Sources:  CML, Inland Revenue, ARLA, Halifax, Propertyfinder.com, Bank of England