A review of recent trends in house construction and land prices in Great Britain

Abstract

Over the last few decades, house prices in the UK have risen at a higher rate than general prices, as measured by, for example, the retail price index. Construction prices, on the other hand, tend to have risen broadly in line with general prices. Assuming the same things are being measured in each case, this implies that, over the period, the price of land, the most significant non-construction element of house prices, has risen at a faster rate than house prices and a much higher rate than construction prices. This paper reviews past price trends and concludes that not only have house prices risen faster than construction prices but also that, as a result, construction prices represent a smaller proportion of house prices. The paper also considers briefly what might be the implications if that trend continued- or if it did not.