The total value of all homes across the UK has reached a record £8.7 trillion, but rising mortgage costs are likely to lead to a slump in 2023.
The country’s 30 million homes were valued by realtor Savills at £8.68 trillion at the end of 2022, up just over 5% or £425 billion on the previous year.
However, it was a smaller increase than the £700bn annual increase in 2021 and the £500bn increase in 2020, as buyers have paid more for more spacious homes during the pandemic and the subsequent shift to work from home.
“The growth in house prices over the last three years has considerably increased homeowners’ paper wealth, driven in large part by the well-documented ‘race for space’ over the period,” Lucian Cook, head of residential research at Savils said.
Savills said it expects 2022 to represent a “high water mark” for the nation’s home values for years to come, and warned that prices are likely to decline as rising mortgage costs put pressure on first- and second-time buyers.
“While mortgage loans make up less than a fifth of the value of the nation’s housing stock, the cost and availability of that debt will be crucial to the shape of the housing market over the next four to five years,” Cook said. “Recent figures from the HMRC indicate that buying activity peaks among those in their 30s, with those under 45 accounting for 59% of all purchases.
“Combined with the prospect of lower levels of home construction, we expect 2022 to represent a high watermark for the value of the nation’s housing stock for a few years to come.”
The numbers compiled by the company were for all homes, including wholly owned and mortgaged homes, as well as private and social rental properties.
Of the £8.7 trillion of residential property in the UK, just over £7 trillion is owned by owner-occupiers, with £1.7 trillion of the value owed in mortgage debt. Of that total, nearly half – a record £3.34 trillion – was held by homeowners without mortgages.
“The total value of all homes has increased by nearly a quarter (23%) since 2019, while outstanding mortgage debt has increased by 11%,” said Cook. “So while outstanding loans increased by £168bn, the growth in total equity was well over nine times that figure, at £1.46trn.”
Owner occupiers have been the main beneficiaries of this value growth, Savills said. According to their estimates, almost 40% of the growth (£645bn) over the last three years was enjoyed by those who paid off their mortgage debt, while mortgage owner occupiers accounted for 34% (£549bn) of the increase.
According to Cook, some key trends have created a shift in who has benefited from the rise in house prices over the last five years, with the biggest gains concentrated in the hands of owner-occupiers rather than homeowners who buy to rent.
“Not only do we continue to see people who benefited from the homeownership boom of the latter part of the 20th century join the ranks of the mortgage free, but there has also been a modest recovery in the number of foreclosed homeowners, due to rising levels of home ownership. of first-time buyer activity during the period,” he said.
“At the same time, however, we have seen pressure on private rental housing stock levels due to increased regulation and taxation, despite rising tenant demand. As a result, growth in the total value of foreclosed owner-occupied homes has exceeded that seen in the private rental sector, reversing the trend of the previous five years.”
Between 2012 and 2017, the value of private leased shares grew by £495 billion, according to Savills’ estimates, more than the £443 billion growth in the value of homes owned by foreclosed owners. But over the five years to the end of 2022, the value of private leased shares rose by a much less £222 billion, while homeowners’ foreclosed homes added a total of £669 billion to their value.