Do house prices rise that much? A dissenting view

The debate over the social significance of home ownership partly rests on the ‘house price assumption’ — the notion that house prices rise consistently above general inflation rates and benefit all owners. However, these theoretical claims rest on sparse empirical evidence and are beset by measurement difficulties. This article attempts to measure real house prices (ie adjusted for inflation) and pure house prices (ie adjusted also for quality and quantity changes) for Britain since the mid 1960s. Comparisons are also made with high and low price regions in Britain and with four other north European countries. Results suggest that real and, even more, pure price gains are not assured, that price falls are as significant as price rises, and that over the long term gains may be low and even ephemeral. Short term booms and slumps may distribute gains and corresponding losses between owner occupiers, but this redistribution is likely to be socially random. These results therefore support criticism of the ‘housing sector cleavage’ model.