A real estate bubble in medieval England?

Financial history experts from Henley Business School’s ICMA Centre are to investigate the possible existence of a real estate bubble in medieval England. The University of Reading has recently won a research project grant worth almost £200,000 from the Leverhulme Trust.[1] The research team, comprising Professors Adrian Bell and Chris Brooks, will examine in detail the workings of the English real estate market in the thirteenth to fifteenth centuries.

Professor Bell said, “I am delighted that Leverhulme has chosen to fund this project, which builds on our previous successful research on the wool and foreign exchange markets and sovereign borrowing and credit crises in thirteenth century England, and aims to draw policy-relevant lessons from the medieval environment for contemporary problems.”

Prior work conducted by the project team has shown that medieval financial markets were far more sophisticated and well-functioning than had previously been reported. Following the credit crisis of 2007-8, their body of work has been extensively drawn upon to highlight parallels with the current economic situation and to propose appropriate policy responses in the light of this historical analogy.

The contemporary British housing market is perceived as being beset with problems leading to serious social and economic consequences, and there is much discussion of the possible existence of speculative bubbles in house prices. Yet the existing historical literature on the development of the UK housing market in the pre-Victorian era is sparse and mainly descriptive.

This will be a unique, interdisciplinary study that will considerably advance understanding of the medieval property market in England by analysing it both from a historical perspective and using sophisticated econometric techniques. As well as a national overview, the project will examine regional variations in property prices and rents with the aim of identifying whether the North-South divide can be traced back to the Middle Ages. Better data on medieval property prices and rental values will also contribute to an understanding of the distribution of wealth and changes in living standards over the long run. The study aims to be the first to test for speculative bubbles in medieval real estate markets in England, which would constitute much earlier financial market bubbles than documented anywhere in the existing literature.

The project is timely given current debates about whether the property market in the South of England is overheating and whether policy mechanisms, including higher transactions taxes or reductions in the availability of credit, should be put in place to prevent the formation of (another) speculative bubble. The parallels that the work will draw between the medieval and modern markets aims to provide governments and regulators with some historical context within which they can make more informed decisions.

The Leverhulme Trust

The Leverhulme Trust was established in 1925 under the Will of the First Viscount Leverhulme with the instruction that its resources should be used to support “scholarships for the purposes of research and education.” Since that time, the Trust has provided funding for research projects, fellowships, studentships, bursaries and prizes; it operates across all the academic disciplines, the ambition being to support talented individuals as they realise their personal vision in research and professional training. With annual funding of approximately £80 million, the Trust is amongst the largest all-subject providers of research funding in the UK. www.leverhulme.ac.uk/

[1] “The first real estate bubble? Land Prices and Rents in Medieval England c. 1200-1550,” Leverhulme Trust grant RPG-2014-307.