UK house prices slip in H2

Chemical companies, Consumer demand, Economic growth

UK housingFeb11.pngUK housing markets followed the US lead in recent decades. Conservative and Labour governments both shared a belief in extending property ownership as widely as possible. But what neither foresaw was the ‘unintended consequence’.

Their policy of boosting home ownership coincided with the entry of the BabyBoom generation (those born between 1946-70) into the 25 – 54 age group. This is the period when people normally settle down, marry, and have children. And UK births had risen 15% over the period versus the previous 25 years, making it the largest generation in UK history.

Naturally, they responded enthusiastically as successive governments promoted the concept of home ownership. They particularly liked the fact that any gain on the sale of one’s main residence was completely free of tax. Thus rising home ownership led to the rise of the ‘wealth effect’.

House prices rose dramatically as the Boomers married and settled down, allowing them to re-mortgage and extract equity. And as in the USA, they used this extra cash to buy exactly those items most linked to chemical and polymer consumption – new cars, new kitchens and new bathrooms.

Of course, this pattern should have ended with the dotcom downturn in the early 2000s. But unfortunately in the UK, as in the USA, the central bank believed it was a master of the universe. Thus as the Governor of the Bank of England told Parliament in March 2007:

“Confronted with what we saw we knew that we had to stimulate consumer spending. That pushed up house prices and increased household debt. That problem has been a legacy to my successors; they have to sort it out.”

Sadly, this “legacy” is now finally beginning to be sorted out. Home prices, like consumer spending, were supported during 2009-10 by record low interest rates, which meant homeowners on variable mortgages (the vast majority) had a major boost to their discretionary income.

But now, as the above chart from the UK Land Registry shows, prices seem to have begun to fall again. And Justice Secretary Ken Clarke, a successful Finance Minister in the 1990’s, warned at the weekend that “I don’t think Middle England has quite taken on board the scale of the problem that will emerge as the (government’s) cuts start coming home.”


US heads towards New Normal for housing markets


Major changes are underway in Western housing markets. They are generational in ...

Learn more

China seeks 'soft landing' for house prices


Housing’s share of China’s GDP has tripled over the past decade to 6...

Learn more
More posts
Hertz goes bankrupt as non-essential consumer demand disappears

The US Federal Reserve has now spent $7tn bailing out Wall Street. But it couldn’t save the 10...

Debt, deflation, demographics and Brexit set to challenge London house prices

London property websites haven’t used the word “reduced” for many years. But it...

Smartphone sales head into decline as affordability becomes key

The smartphone sales decline accelerated in Q1, as Strategy Analytics report: “Global smartpho...

The bill for two decades of doomed stimulus measures is due

The Financial Times kindly made my letter on the risks now associated with central bank stimulus the...

Local supply chains replace global trade as world starts to “do more with less”

Something quite dramatic is happening in the global economy.  Of course, Wall Street analysts still...

Financial markets enter their Convulsion phase

Many companies and investors are still comparing today’s downturn to the 9-month hiccups seen afte...

World risks moving from Denial into Anger as the Paradigm of Loss moves forward

The head of the IMF has warned again on the likely scale of the economic depression ahead: “Gl...

The world has wasted 3 months – there is little time now left to avoid a Covid-19 catastrophe

It is now 3 months since China’s state television broadcast the first news of the Wuhan virus,...


Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more


Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more