£8.7 trillion in 2022 with annual rise of £425 billion

The total value of all homes across the United Kingdom (UK) has reached a record high of £8.7 trillion in 2022 with the country’s 30 million homes valued by the estate agent Savills at a combined £8.68 trillion at the end of the year.

This is a rise of just over five per cent or £425 billion a year earlier. However, this rise was a smaller rise than the £700-billion annual increase in 2021 and the £500-billion rise in 2020, as buyers paid more for roomier homes during the pandemic and the subsequent shift towards working from home.

It has been noted that rising mortgage costs are likely to lead to a dip in 2023. The head of residential research at Savills, Lucian Cook told the UK’s Weekly Guardian, 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”.

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.

According to Cook, “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”.

Disaggregating home values

Of the £8.7-trillion worth of residential property in the UK, just over £7 trillion is owner-by-owner-occupiers with £1.7 trillion of the value owed in mortgage debt. Of this, almost half – a record £3.34 trillion – was held by mortgage-free homeowners.

For Cook, “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 per cent… . So, while outstanding borrowing increased by £168 billion, the growth in the total equity pot was well over nine times that figure at £1.46 trillion.”

Owner-occupiers have been the major beneficiaries of this value growth, Savills reported, noting that their estimates show that almost 40 per cent of the growth (£645 billion) over the past three years, was enjoyed by those who have paid off their mortgage debt, while mortgaged owner-occupiers accounted for 34 per cent (£549 billion) of the increase.

Cook notified that 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 stated.

Pressure on privately rented housing stock levels

At the same time, it has been seen where pressure have come 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 £495 billion, according to Savills estimates, more than the £443 billion 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 £222 billion, while mortgaged owner-occupier homes added a total £669 billion to their value.