If you were to believe many media reports on house prices you would probably conclude that it’s a simple case of a lack of houses being built that has pushed up house prices. But if we move away from the froth and assertion what do we find?
Looking at the data for Cornwall from 1995 up to and including 2013 we find some interesting points. We looked at prices, sales and build for each year, using 1995 as the base year at 100. Since 1995 all three indicators have shown an increase notably prices. Up to 2001 all three moved upwards in a similar fashion, then house prices took off. What happened to build rates? Well they plateaued between 2003 and 2009 then rose. Sales peaked in 2002 fell back then declined in 2008 before trending upwards again though they are still well below pre-2008 levels. The most interesting thing is that the increase in house prices is not linked to a decline in house building. It’s not really linked to changes in sales either.
This suggest house prices are reflecting other factors in the housing market. This is not so surprising really. We know that there are many factors which influence house prices including incomes, mortgage availability and interest rates. The moral of the story is to beware of simplistic statements that if more houses were built house prices would not rise (as much), it just doesn’t add up!