ABSTRACT
Britain has experienced three major house price booms over the past thirty years: 1971–73, 1977–80 and 1986–89. After each boom there has been a substantial market downturn during which prices fell in real terms. The slump of the early 1990s was unique, however, both for the length of the downturn (1989–95) and its severity: prices fell by 30% in London and the South East in cash terms and by far more in real terms, sales slumped, more than 400,000 homes were repossessed and over a million home owners suffered negative equity. In addition, it has administered a severe shock to confidence in the housing market, which may take years to recover fully. The longstanding belief that houses are a safe investment and a source of almost guaranteed capital gains has been severely undermined, particularly for the large number of first-time buyers who entered the market in the 1980s. The purpose of this chapter is to examine the history and structure of the cycle of booms and slumps in order to provide a context for subsequent chapters and show the regional differences in house prices and the changes in affordability and prices over time. First, however, it is necessary to address the question of why house prices rise at all, and why they rise unevenly rather than steadily.
