From the data nerds at Global Financial Data:
Global Financial Data has put together a data series covering seven centuries of real estate prices. The series covers real estate costs in Great Britain from 1290 to the current day.
How did we do this? Unfortunately,
there was no Ye Olde Zillow Real Estate Co. that had stayed in business
for seven centuries and allowed us to analyze their records, but
instead we spliced together several long-term series to create this
index. The
data from 1290 to 1894 is actually based upon the rental costs of
housing rather than actual housing prices since rental data was the only
information that was available. The data from 1895 to date is based
upon actual housing costs using series put together by the Bank of
England and the Nationwide Building Society.
A Plague on Your Houses!
The
result is illustrated in the graph below. As the logarithmic chart
illustrates, housing prices have steadily risen over the past 600 years. The only time when housing prices declined dramatically and hit their nadir was in the 1340s. And why was that? Because
the Bubonic Plague decimated the population, reducing it by around
one-third. Since there were fewer people, but no decrease in the stock
of housing, prices and rents collapsed, falling more than at any time in
history, even after 2008.
According to this index, the average house which cost around £200,000 in 2016 (obviously, the index isn’t limited to London), cost about £50 in 1290 and £16
in 1360. There was a general increase in prices during the inflation of
the late 1500s and early 1600s when gold and silver from the Americas
flooded Europe and the rest of the world, expanding the money supply and
raising prices.
A
second inflation occurred during the Napoleonic Wars when Britain went
off the gold standard, and of course the largest increase in housing
prices occurred after World War II when Britain suffered its worst
inflation in history.
Before
the Bubonic Plague, average wages in England were around 2 per year,
but after the plague, in the 1370s, workers earned an average of 4 per
year. The survivors lived in the lap of luxury. In
the 1290s, it would have taken an average worker 20 years to earn
enough to buy a house, but by the 1370s, it only took four years. Now,
it would take about 5 years of wages to buy an average home.
The real question, however, is whether housing prices increased more rapidly than inflation in general and by how much....MORE
