Q. Given that so much has been written in recent months about the demise of the 2008/9 property market, what was it that caused the last house price crash? I would be interested to know this in order to do an historical comparison.

A. After the major recession of the late 1970s ended, right up to 1988 in fact, UK property prices saw a similar growth spurt as we have seen in the past decade. There were two key reasons for the crash in the late eighties. Firstly, the era coincided with an increasing demand from a more affluent post-war generation encouraged into home ownership by the then Prime Minister Margaret Thatcher. Secondly, there was great liquidity in the economy with an easy availability of credit.

However, when the Chancellor of the Exchequer, Nigel Lawson, announced in March 1988 that he was ending “double mortgage tax relief,” a process whereby both parties of an unmarried couple could claim tax relief (MIRAS) on mortgage interest, people flocked to snap up property and real estate inflation went through the roof as sellers cashed in on the boom.

As soon as the cut-off date was reached a few months later, interest in property buying subsided almost overnight with viewings and sales plummeting. Estate agents struggled to sell even competitively priced property and the absence of interest in the market led to the crash. The killer blow came between May 1988 and October 1989 when interest rates rocketed from just under 7.5% to nearly 15%. It was this increase coupled with lack of affordability because of the cessation of double tax relief that spelled the death knell for property, a market reversal which was to last for several years. Like all markets, however, recovery eventually comes.