The total value of all homes across the UK has reached a record high of £8.7tn but rising mortgage costs are likely to lead to a dip in 2023.
The country’s 30m homes were valued by the estate agent Savills at a combined £8.68tn at the end of 2022, a rise of just over 5% or £425bn on a year earlier.
However, it was a smaller rise than the £700bn annual increase in 2021 and the £500bn rise in 2020 as buyers paid more for roomier homes during the pandemic and the subsequent shift towards working from home.
“The growth in house prices over the past three years has added considerably to the paper wealth of homeowners, driven in no small part by the well-documented ‘race for space’ over the period,” Lucian Cook, the head of residential research at Savills, said.
Savills said it expected 2022 to represent a “high watermark” for the value of the nation’s homes for the next few years and warned prices were likely to fall as rising mortgage costs squeezed first- and second-time buyers.
“Though mortgage borrowing equates to less than a fifth of the nation’s housing stock value, the cost and availability of that debt will be crucial to the shape of the housing market over the next four or five years,” Cook said. “Recent figures from HMRC indicate that buying activity peaks among those in their 30s, with the under 45s accounting for 59% of all purchases.
“Combined with the prospect of lower levels of house building, we expect that 2022 will represent a high watermark for the value of the nation’s housing stock for a few years.”
The figures compiled by the firm were for all homes including those owned outright or with a mortgage, as well as private- and social-rented properties.
Of the £8.7tn worth of residential property in the UK, just over £7tn is owner by owner-occupiers, with £1.7tn of the value owed in mortgage debt. Of this, almost half – a record £3.34tn – was held by mortgage-free homeowners.
“The total value of all housing has risen by almost a quarter (23%) since 2019, while outstanding mortgage debt went up by a lower 11%,” Cook said. “So, while outstanding borrowing increased by £168bn, the growth in the total equity pot was well over nine times that figure at £1.46tn.”
Owner-occupiers have been the major beneficiaries of this value growth, Savills said. According to their estimates, almost 40% of the growth (£645bn) over the past three years was enjoyed by those who have paid off their mortgage debt, while mortgaged owner-occupiers accounted for 34% (£549bn) of the increase.
According to Cook, a few key trends have created a shift in who has benefitted from house price growth over the past five years, concentrating the greatest gains in the hands of owner-occupiers rather than buy-to-let landlords.
“Not only have we continued to see people who benefitted from the homeownership boom of the latter part of the 20th century joining the ranks of the mortgage-free, but there’s also been a modest recovery in numbers of mortgaged homeowners, due to increased levels of first-time buyer activity over the period,” he said.
“At the same time, however, we’ve seen pressure on privately rented housing stock levels, due to increased regulation and taxation despite rising tenant demand. As a result, growth in the total value of mortgaged owner occupied homes exceeded that seen across the private rented sector, reversing a trend over the previous five years.”
Between 2012 and 2017 the value of private rented stock grew by £495bn, according to Savills estimates, more than the £443bn growth in the value of homes owned by mortgaged homeowners. But over the five years to the end of 2022, the value of private rented stock rose by a much lower £222bn, while mortgaged owner-occupier homes added a total £669bn to their value.
