It may be a publican whom we should start discussing when asking ‘What 2 – 3 year period is mainly responsible for creating the property market we know today and why?’
Richard Ketley was the landlord of the Golden Cross Inn at 60 Snow Hill Birmingham. At some point in 1775 ‘Ketley’s Building Society’ came into existence. Back then Building Societies were ‘terminating’. The members pooled funds and a lot was drawn for the person for whom a home would be built. Once constructed that property was used as security to ‘raise a loan at reasonable cost’ for the next lottery draw within the membership and so on. Once all the members were housed the society was ‘terminated’
Fifty years later, in 1825, over 250 societies existed throughout the country. In March 1980 ‘First Salisbury’ was dissolved, the last ‘Terminating’ society.
The Great Reform Act of 1832 changed voting rules in the country. It formally excluded women but allowed a broader range of property owners and included those whose rent was £10 a year or more.
This opened a doorway and by the 1840’s Building societies began to accept savings from members who were not necessarily potential homeowners.
Now jump forward to 1983 and something seemingly unrelated. An agreement was reached between the government and the London Stock Exchange to settle an anti trust case against the London Stock Exchange. This paved the way for rule changes on 27th October 1986. As mentioned in a 2010 Radio 4 programme: “Lord Lawson isn’t alone in his admission that [through the ‘Big Bang’] we walked into the new banking world without really understanding the risks involved” [by ending the separation of high street banks and merchant banks].
In 1985, as a young trainee estate agent, I distinctly remember the buzz, in many areas concern, of what was happening to the financial world because amongst the conversations was also talk of Deregulation of the Building Societies.
That gave us two powder kegs being loaded and in the run up to 1986 expectation/concerns grew.
On 19th December 1985 there was a second reading of the 1985 Building Societies Bill and a comment was made by Michael Latham as follows “we should never forget that the societies’ real job is to help people to buy homes. We should never forget that people expect building societies to be cautious, conservative, and even dull. There is nothing but honour in the course that has been followed for the past 150 years.”
On 7th November 1986 Royal Assent was given to the 1986 Financial Services Act: ‘The Act required a mixture of governmental regulation and self-regulation‘.
Shakespeare’s Marc Antony said ‘Cry havoc and let loose the dogs of war!’
You might choose to say that ‘all hell broke loose’.
Most of the next two years was like being strapped to the nose cone of Concorde on a supersonic test flight.
1988 saw the largest number of property transactions ever recorded in England and Wales and I doubt I’ll see the number reached again.
When mankind first began to travel and trade a global economy was begun. Pressures around the commercial and financial world drove expectations and desires in the 1980’s United Kingdom. I don’t believe we could have stood against the tide and made different choices; perhaps we should have.
I do remember saying at a surprisingly early, able to vote, age: Why didn’t they regulate that only one salary could be taken into account for a mortgage? Limit the spend, protect people who want a family from the pressure of a two salary mortgage. Naïve? Most likely in my thinking, but well meaning.
I haven’t mentioned MIRAS yet. Mortgage Interest Relief At Source. It was designed to encourage home ownership and was introduced in 1983. In August 1988 the option for unmarried couples to pool their allowance was withdrawn. It caused a rush and in doing so hid what was really happening. Those who were in the industry at the time knew there was trouble, things were changing before August and the way was paved for what became the crash, the recession that properly hit in 1990.
Events in the Finance world, changes in the UK, that took place from 1983 to 1986 shaped the world we inhabit. Deregulation of Building Societies, The ‘Big Bang’, the 1986 Financial Services Act and Miras, may not have been a perfect storm but they were high pressure wave forms that combined, growing greater for a while before falling out of rhythm.
The film ‘Wall Street’ is often referenced and Gordon Gecko’s ‘Greed is good’ comment. The 1980’s was many things and perhaps one way it differed from other decades was that it didn’t hide its ideals. It was perhaps the decade where we lost our naivete amidst a brutal honesty. It was a decade that burnt bright and the property market burnt fast before extinguishing itself. People are always the same, decade by decade, century by century, millennia by millennia; we may paper over the cracks, pretend we are better but in truth Gordon Gecko exists eternally.
I am a dreamer by nature:
Perhaps one day we will get a ‘Generation Reset’, a generation that will change the future, reset thinking and attitudes. Perhaps they will foster a world that values wellbeing more than material assets, that strives for harmony rather than conflict, that understands working together as individuals and nations, nurturing relationships, supporting, working in unison, toiling together, perhaps they will appreciate that wealth should be measured not in the currency of coin, perhaps they will create a future that we didn’t know we should or could dream of and strive for.
If we can do anything positive for the future perhaps we should remove the shackles and allow truly free thinking to break the mould we stepped into all too readily. Don’t try and ‘think outside of the box’ because even that concept affects the process. Forget ‘the box’, forget conventional wisdom, imagine nothing, see and feel the ‘uncarved block’ then picture a great world, begin to imagine the gargantuan challenges in changing our world, our thought processes, our expectations and with time, fashion a pathway to that better place. Create a goal and take the world toward it.
Until then; that two to three year period between 1983 and 1986 is responsible for the property market you are experiencing today and will continue to experience.
This article is in response to question four of ‘Ten key questions to understand where the property market is heading‘.