New research conducted by real estate company Savills has found that the total value of homes in the United Kingdom reached a record high of £8.68trn at the end of 2022, representing a 5.1% year-on-year increase.
Savills head of residential research, Lucian Cook, stated that 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.
While annual growth was lower than in the two preceding years, a total of £1.625trn has been added to the UK housing value over the past three years. Of this, almost half was held by mortgage-free homeowners, a record £3.34trn.
Despite annual growth being lower than in previous years, net housing wealth exceeded £7.0 trillion for the first time last year, equivalent to almost 81% of the total value of UK housing.
Owner-occupiers have been the major beneficiaries of this value growth, with almost 40% of the growth over the past three years enjoyed by those who have paid off their mortgage debt, and mortgaged owner-occupiers accounting for 34% of the increase.
Cook noted that a few key trends have created a shift in who has benefited from house price growth over the past five years, concentrating the greatest gains in the hands of owner-occupiers.
Savills estimates that in the period from 2012 to 2017, the value of private rented stock grew by £495bn, somewhat more than the £443bn growth in the value of homes owned by mortgaged homeowners.
However, 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 of £669bn to their value.
Cook believes that the cost and availability of mortgage debt will be crucial to the shape of the housing market over the next four or five years, with recent interest rate rises likely to put first-time buyers and second steppers under pressure in 2023 and 2024.
Additionally, Savills expects that 2022 will represent a high watermark for the value of the UK’s housing stock for a few years, as the combined prospect of lower levels of house building and pressure on younger buyers’ budgets is likely to present a challenge for policymakers.
