The 10 wealthiest London boroughs are worth 9% more than Scotland, Wales and Northern Ireland combined and Westminster and Kensington and Chelsea are together worth over £200 billion, some 15% more than Wales, according to research from Savills.
The stock has risen from £3.6 trillion 10 years ago, but the balance of housing wealth continues to tilt from North to South and become ever more concentrated in the hands of mortgage free home owners, the research also shows.
according to new data from international real estate adviser, Savills.
With the exception of Wales, the North East and North West, all regions saw an increase in the value of their housing stock and for the first time Savills has measured both housing value and levels of borrowing at a local authority level, revealing highly localised variations in market strength, even within London and the South East.
It also shows that the big winners over the past five years have been owner occupiers without mortgage debt, while the value of private rented stock has grown strongly at the expense of mortgaged owner occupier homes.
‘The housing market remains deeply divided and recent gains have been unevenly spread. The substantial wealth tied up in housing is becoming increasing concentrated in fewer hands in a market where housing equity, heavily concentrated in London and the South, has become the key driver.
The shape of the housing market recovery post credit crunch means that the total value of London, the South East, South West and Eastern regions has risen by £435 billion over the past five years, with a net loss of £206 billion across the other regions.
London and the South East account for just over a quarter, some 26% of the UK’s housing stock, but 42% of total value, with London’s homes now worth a total of £1.226 trillion, the South East £950 billion.
The star performer of 2013 was Wandsworth in south west London, where the total value rose by £8 billion, a rise of 13.7% compared to 9.5% in Westminster and 8.8% in Kensington and Chelsea.
Beyond London, the markets showing the highest growth in the past year have been Aberdeen up £1.7 billion and Elmbridge in Surrey up £1.5 billion, and over the last five years it has been Brighton and Hove with an increase of £5 billion.
The analysis also highlights the rise and rise of private renting. The sector’s value rose by £76 billion in 2013, more than any other sector, with total value at £989 trillion now edging towards £1 trillion for the first time ever. The sector now accounts for 19% of the total value of all UK homes, up from 12% 10 years ago. Over the same period, owner occupied homes with mortgages have slipped from holding 44% of total value to 35% of total value.
The total value of the owner occupied sector, which represents 69% of the total value of all housing, rose by £84 billion in 2013 to £3.6 trillion, but there has been a significant divergence in the performance of mortgaged and unmortgaged owner occupied stock.
Mortgage debt accounts for 24% or £1.27 trillion of the total value of UK housing, up from £1.19 trillion at the peak of the market in 2007, but amongst owner occupiers with a mortgage, the average mortgage debt accounts for 54% of total value.
The UK’s 8.4 billion unmortgaged owner occupiers have seen their total wealth rise by £86 billion to £1.8 trillion since 2008. By contrast, a fall in the number of mortgaged owner occupied households means the total value of properties in this category has fallen by £172 billion since 2008, to £1.8 trillion, of which just £856 billion is equity.
‘Some 10 years ago, homes owned outright had total equity one third higher than those with a mortgage: today it is double. The mortgage market is showing signs of freeing up, but it is highly unlikely to ease enough to reverse this trend in the foreseeable future,’ explained Cook.
This means that owner occupiers without mortgage debt have housing wealth averaging £214,000, while the owner occupier with a mortgage has on average £98,000 of equity, £11,000 less than five years ago.
London has the lowest average levels of debt relative to the value of all privately held stock, at 22% with total equity of £902 billion, while the North East has the highest at 29%, leaving total equity of just £81 billion.
Average debt levels for owner occupied stock are slightly higher, with the South West having the lowest levels of borrowing relative to value at 24%, rising to 32% in the North East.
However, variations are highly localised. The list of local authorities with the lowest levels of mortgage debt among the owner occupied sector is topped by the London boroughs of Kensington and Chelsea at 8%, Westminster at 9% and the City of London at 12% and closely followed by Eden in the North West at 12% and West Somerset at 13%.
‘The store of housing wealth in the most valuable boroughs of London is unmatched by other locations. Beyond these central locations, mortgage debt is lowest in areas where baby boomers are most concentrated, or where housing equity built up in the capital has been imported, such as higher value commuter and second home hotspots,’ Cook pointed out.
By contrast, the most indebted local authorities are Corby in the East Midlands at 42%, Thurrock in Essex at 43%, Barking and Dagenham at 47%, Newham at 47% and Slough at 49%.
‘The level of housing debt among those with mortgages is particularly high in these locations. This will continue to act as a constraint on house price recovery in these areas, not least because they will be most susceptible to interest rate rises in due course,’ explained Cook.
Debt levels amongst mortgaged owner occupiers in the South peaks in Slough at 75% debt and Newham at 76% in London, but Blackpool at 79% debt and Burnley at 80%, both in the North West, top the list of most indebted locations.
‘Though the geographical spread of housing growth will change over the next five years, we expect a continuation of these trends, with the equity rich markets outperforming those with high levels of mortgage debt, and opinion will remain deeply divided as to whether house price growth is a good or bad thing,’ Cook concluded.
