ABSTRACT
“A feature of the housing market in Britain is the enduring belief that home ownership is one of the best, if not the best, investment accessible to ordinary people” (Doling and Ford, 1991:110). In the house price booms of the 1970s and 1980s the conventional wisdom that housing was a good, if not the best investment, available to most people was strongly reinforced. Not only did nominal house prices keep well ahead of the rate of inflation, but building society finance was made available at relatively cheap and, until the 1980s, generally negative real rates of interest. Add on mortgage interest tax relief, the absence of capital gains tax on main residences and the absence of a tax on imputed rented income, and house purchase became what Kit Mahon, ex-Deputy Governor of the Bank of England, tellingly described as “a cheap, almost risk-free method of financing an appreciating asset with a depreciating debt”. Whitehead (1979) commented that “Buying and living in one’s own home has proved to be one of the most profitable investments, at least since 1945”, and Ray Pahl (1975) observed in the wake of the early 1970s boom that “A family may gain more from the housing market in a few years than would be possible in savings from a lifetime of earnings.” Nor were such views confined to academics. In a Parliamentary debate in 1979 on the proposal of the Thatcher Government to give council tenants a “Right to Buy” their own homes at a discount to the market price, Michael Heseltine, the Minister responsible, stated that:
In a way and on a scale that was quite unpredictable, ownership of property has brought financial gains of immense value to millions of our citizens. As house prices rose, the longer one had owned, the larger the gain became…this dramatic change in property values has opened up a divide in the nation between those who own their own homes and those who do not.
