It's an old aphorism that there are few safer places to put your money than 'bricks and mortar'. Property investments - compared with their more ethereal cousins, equities, gilts and derivatives - have a reassuring solidity about them. It is perhaps surprising then that house price records, which one might expect to stretch back to the Domesday book, have only been kept systematically since the second world war. Prior to that there are sources which allow their tenuous extension back into the late 19th century, beyond which there is only the odd, isolated figure of dubious provenance.
In his 1812 treatise on the Empire's finances, Patrick Colquhoun noted that the average house price was £162, or about £3,300 in 1995 terms - around 5% of the current mean of £61,000. This vast real increase is largely attributable to an equally sharp rise in real incomes. The housing market is an inelastic one, and more money chasing a limited supply will drive prices up. The average 1990s house is also a far cry from its 1810 counterpart in terms of amenities: central heating, plumbing and double glazing have all added value.
The graph shows house prices tracing a steady upwards curve, superimposed on which are a series of booms and busts. According to Dr Paul Sanderson, research controller at Nationwide Building Society, these booms have been largely associated with monetary policy. Inflation is also important, he says, as it both fuels and feeds off rising prices. The exceptional boom of the late 1980s was made possible by a unique combination of these factors, together with a surge in first-time buyers, and a newly deregulated mortgage market. The severity of the subsequent crash was exacerbated by low inflation. Earlier slumps have been disguised to some extent by high inflation, with the effect that nominal prices didn't actually fall. In the early 1990s they did, however, shattering market confidence and saddling many property-owners with negative equity - property worth less than the mortgage secured on it.
The outlook is now brighter - in the short term we can expect something of a 'cyclical pick-up' says Sanderson, followed by moderate growth. In the very long run it is reasonable to assume that prices will rise broadly in line with incomes; hence, the oft-heard advice for those with negative equity to sit tight. But will we see another price explosion? Prevailing wisdom, and the current environment, suggest not. Looking back on earlier booms and busts, though, the current calls for caution take on a familiar ring. 'Unprecedented' disasters are often only so called because their precedents have been forgotten.