How Much Has Your Home Earned in 50 Years?
Landlords follow investment advice advocated by author Mark Twain - that’s ‘buy land, they’re not making it anymore'. And a shortage of land for new homes countered by growing demand pushes up property prices.
By how much was worked out by number crunchers at Newcastle’s Stripe Property Group.
They compared changing house prices and the impact of inflation on home values from 50 years ago to come up with some astonishing figures for property investors.
In 1972, the average home was worth £5,158, which equals a price today of £49,333. That price compares with an average home value in May 2022 of £278,436. It’s worth noting a 15 per cent deposit on an average home is £41,765, which is comparable with the inflation-adjusted value from 1972.
London investors gain most
In 50 years, the value of an average home has soared by 464 per cent. To reach this figure, the value has surged by 9.3 per cent a year. The rise is equivalent to a property owner earning £4,582 yearly for 50 years, or £229,100 in capital gains. After looking at the national house price picture, the team analysed data for the regions.
Unsurprisingly, landlords in London have enjoyed the most significant increase in property values over the past five decades.
House prices in the capital have spiralled 677 per cent since 1972. After adjusting for inflation, homeowners have enjoyed a 13.5 per cent hike in prices in each of the 50 years - which added £9,000 a year to their property’s value.
London was not the only place where house prices have hit the heights over the past 50 years.
No safer bet than property
Landlords in the East Midlands and South West both saw 10.7 per cent gains a year, adding £4,051 and £5,288 to values, respectively.
The East Midlands gain is lower because the average house price in 1972 was cheaper than property in the South West. Just behind - all with 10.6 per cent a year growth - were the East of England, the South East, North West and North East. The South East also saw the highest yearly cash rise at £6,482.
“Whether you’re purchasing for yourself or as an investment, there’s no safer bet than the UK property market when it comes to a consistently strong return,” said James Forrester, managing director of Stripe Property Group.
“To think, having purchased 50 years ago, you would have seen the equivalent of £4,500 accumulated per year is pretty remarkable, and this increase speaks volumes about the resilience of the market.”
Meanwhile, fears are looming that hundreds of thousands of cash-strapped tenants on housing benefits will be unable to pay their rent due to the rising price of fuel, food and energy.
Tough choices for tenants
Data from the Office for Budget Responsibility, the independent watchdog of government spending, has warned that more than half of tenants with housing benefits are making tough choices about paying their rent and other bills.
Their analysis shows that 57 per cent of claimants don’t have enough cash to pay all their bills - up to 820,000 private rented households nationwide out of 4.2 million buy-to-let and HMO properties.
The OBR report says that if benefits stay frozen until 2025, housing allowances will rise 0.1 per cent and only increase the problem.
50 years of house prices FAQ
What is the OBR?
The Office of Budget Responsibility’s job is independent oversight of public spending. The OBR effectively double-checks the Treasury’s figures to ensure spending targets are costed and set at a reasonable level.
How much is housing benefit?
How much housing benefit a tenant is paid depends on the property location and how many people live there. There’s no set rate but a scale called Local Housing Allowance (LHA) rate, which offers an ‘eligible’ rent based on other private rents in the neighbourhood. The eligible rent is much lower than the actual rent, and the tenant must pay the difference from other income.
Find out more about LHA rates in your area and what you might get
Do I pay CGT on the increase in property value?
If you own private letting property, a holiday let, or a second home, capital gains tax is due on the difference between the sale price and purchase price, less some expenses and tax reliefs.
Different rules apply to landlords who owned private letting property before April 1982.
I want to gift a property. Do I still pay CGT?
Yes, gifting a property comes under capital gains tax rules. The sale or disposal price will be the property’s open market value on the day of sale.
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View Related Handbook Page
Investing in a Property
Investing in a private rented property can be achieved in a variety of ways. Sometimes landlords inherit a property that they then turn over to renting. Sometimes owners of properties become unintentional landlords because they are unable or unwilling to sell a property at the value the market currently dictates.