No more slumming it for UK's homes

TURN the clock back 50 years and you would find a Britain where millions of families endured a life of post-Victorian squalor in homes without hot water or the most basic of amenities.

In the following half century, the UK has undergone a housing revolution, with a dramatic growth in home ownership accompanied by a striking upgrading of the housing stock, according to a Halifax report.

It all happened not by accident but by design.

First, Labour's introduction of direct tax relief on mortgages in 1969 brought the monthly cost of a mortgage within reach of those previously excluded.

Then the Conservatives' right-to-buy programme, spearheaded by former environment secretary Michael Heseltine, lowered the entry bar again, unleashing a privatisation bonanza which dwarfed all the other sell-offs of the Thatcher era put together.

Scots were the biggest advocates and beneficiaries, buying more council homes than those elsewhere in the UK, according to HSBC bank.

Our relationship with the housing market since then has been one of love-hate, depending on whether prices or mortgage repayments were going up or down. Values have indeed soared and then crashed four times in the intervening years.

But the biggest success was not the cash windfalls enjoyed by those who stayed the course, but the upgrading of housing stock, a development not seen in European countries, such as France, with a lesser tradition of home ownership.

For even as the Fab Four made Britain chic, the Swinging Sixties had swung on by many neighbourhoods blighted by slums with only outside toilets. In 1967, 22 per cent of UK homes had no hot water, compared with less than 1 per cent today, and in 1960 14 per cent had no inside toilet, according to the Halifax.

Nearly seven out of ten families rented, the majority from private landlords who had little interest in upgrading their properties.

But home improvement as well as mass home ownership took off after Labour chancellor Roy Jenkins introduced Mortgage Interest Relief At Source (Miras) at the end of the Sixties, a valuable perk in the days of high income tax rates. The British obsession with home ownership was born.

The proportion of people owning their own home in the UK has risen from 43 per cent in 1961 to 70 per cent today. Over that period, house prices have outpaced wage inflation, growing on average in Scotland by 2 per cent annually ahead of wages, compared with the UK average of 2.5 per cent.

But then Scotland was late to join the party, with Scots more conservative and suspicious about taking on big debts.

Gerry Kay, chief executive of the Scottish Building Society, recalls: "My parents didn't own their own home, and neither did most of the people we knew when I was growing up. They had a horror of debt, as did many in Scotland at that time. I think it must have gone back to the days of debtors' prison."

But that natural caution may have paid off. Until the recent property crisis, Scotland was less affected than other areas of the UK by the regular house price cycles, although price crashes were not unknown, with oil capital Aberdeen particularly vulnerable.

Halifax economist Martin Ellis explained: "Pronounced cycles have been a key feature of the housing market since 1959, with four distinct periods of rapid real house price growth after allowing for inflation. These occurred in 1971-1973, 1977-1980, 1985-1989 and 1998-2007."

Unfortunately, each upward swing in values was followed by a painful slide where prices fell significantly after allowing for inflation. The worst decade for house prices was the 1990s when they fell 22 per cent in real terms (after allowing for inflation).

The boom of the last decade saw a record price runaway, with values soaring 62 per cent after inflation, though the 1980s picture was not dissimilar, rising 61 per cent. In Scotland, the price increase has been more muted, with values climbing 120 per cent since 1969 after accounting for inflation, compared with 174 per cent for the UK as a whole. This is the lowest figure in Britain, and compares with 183 per cent for Northern Ireland, 160 per cent in Wales, 229 per cent for Greater London and 188 per cent for Yorkshire. But it leaves property north of the Border more affordable than in many parts of the UK.

This lag could be partly due to Scotland boarding the homeownership bandwagon late, which only took off with the right-to-buy programme.

Scots bought far more council homes and enjoyed bigger discounts than people in other parts of Britain. Discounts, of an average 55 per cent of the purchase value, cut the price they paid by 9 billion. This compared with reductions in value of 44 per cent available to those living in the north-east of England and Yorkshire.

Around 440,000 council houses were sold under the scheme in Scotland, representing 18 per cent of the housing stock. The next biggest enthusiasts were residents of London, where 290,180 homes or 12 per cent of the housing stock was sold, followed by the West Midlands, where 9 per cent or 215,310 were sold.

And most of those who bought reaped significant further rewards. Around 40bn was given away in total as part of the 86bn right-to-buy programme, but the windfall didn't stop there. An average council house, valued at the end of 1979 at 15,528, is today worth 101,917.

These gains dwarf those made in the share privatisation of the 1980s and 1990s put together. The stock market flotations of nationalised companies were worth 58bn, and attracted 20 per cent discounts on issue, only amounting to a 14bn giveaway, according to the HSBC report.