Hamish McRae: How will we find homes for another 10 million people?

Sixty years on. The Diamond Jubilee has created a moment to ponder the changes that have taken place in Britain over two generations, with one opinion poll at least suggesting that a majority of people feel the country or, rather, countries are a worse place now than in 1952. Yes, we are richer in money terms but, in social terms, many people seem to feel a sense of loss.

It is such a huge subject that it is quite hard to know how to get to grips with it. The histories, Austerity Britain 1945-51 and Family Britain 1951-1957, by David Kynaston capture very well both the innocence and the oppressiveness of the period: the long trudge back to normality after the Second World War. But, in a way, they are too big. So a study of one aspect of the then and now, housing, just published by the Halifax, deserves attention.

There has been a string of huge changes. Perhaps socially the most remarkable is that owner-occupation has more than doubled, going up from 32 per cent of homes in 1953 to 66 per cent last year. (The peak in owner-occupation was 71 per cent in 2003.) The private rental sector has declined almost in line, for the proportion of socially rented housing has remained more or less the same, at 18 per cent in 1953 and 17 per cent last year – its peak came in 1981 when 31 per cent of homes were socially rented. So we have, over two generations, gone from a nation of renters to a nation of owner-occupiers – even if we may be moving back a little now towards renting.

The second huge change is in house prices. Obviously, in money terms, prices have soared – the average price in 1953 was £2,200, whereas now it is £162,300. But it may come as a surprise that house prices have risen only slightly faster than incomes, and not that much faster than retail prices, at least on a year-on-year basis. In real terms, i.e. adjusted for inflation, house prices have gone up by 1.8 per cent a year, against a rise of 1.6 per cent in incomes. Between 1951 and 1961, house prices were on average 3.5 times earnings; between 2001 and 2011, they averaged 4.8 times. So houses have become less affordable, but not radically so. Indeed, the lowest income- to-price ratio was in the 1990s when it was 3.4 per cent.

A third change, which needs to be set alongside the rise in prices, is the improvement in the quality of the housing stock: in 1947, more than 40 per cent of houses did not have an inside bath or shower, and more than 60 per cent did not have a basic hot water system. On the other hand, we are building smaller homes now than we used to (exactly the opposite is happening in the US), though that may be in response to a decline in family size, and people living on their own.

The housing figures confirm another well-known trend, the shift of house prices mirroring the shift of economic activity from north to south, the gap widening particularly since 1971. Since then, London has seen the largest increase in prices, while Scotland has seen the smallest. Indeed, Scotland is the only part of the UK where house prices have risen by less than retail prices. In London, they have nearly doubled relative to the RPI. But, and this was very evident during the last house price boom, while prices have generally risen, they have been volatile. There have been long spells, particularly in the 1950s, when prices fell. So the market for homes is still a bit of a lottery, more so perhaps than most homebuyers appreciate.

And what happens next? Everyone gets predictions wrong and this goes far beyond the scope of this exercise, but, looking at population projections for the UK, it is hard to see demand for homes falling, at least in London and the Home Counties. If we are to fit another 10 million people into the country over the next 30 years, they will have to have homes to live in. So there is some sort of floor under house prices.

Luxury boom, bust for the rest

I don't know whether to be encouraged or depressed. We have just had a set of upbeat survey responses from the CBI, with reported high street sales surging and the retail trade generally becoming more optimistic.

You have to set this CBI data, which is derived from what retailers think rather than the official numbers of what they are selling, against bad reports for April, but, to take this at its lowest, there seems to have been some bounce back and that cannot be bad news. It is consistent with a slow-growing economy, but not one in recession, and any slight fall in petrol prices would nudge real sales up.

No, the thing that depressed me was another report, this one from Standard & Poor's, that the shares of producers of luxury goods were doing better than everyone else. S&P has constructed an index of producers of luxury clothing, jewellery, up-market cars, top-end hotels and other services, and reports that this index is up nearly 10 per cent a year over the past six years, much better than shares generally. Of course, it is good that some companies are doing well, and there is nothing wrong with luxury. But it does rather hammer home that we are in a world of "haves" and "have-nots", with the former particularly in the Asia-Pacific region and too many of the latter nearer home.

h.mcrae@independent.co.uk