Housing wealth stands at £4.84 trillion, net of mortgage debt, or 2.7 times GDP and for owner occupiers with no mortgage total property wealth exceeded £2 trillion for the first time, the analysis from real estate adviser Savills shows.
It also reveals that the private rented sector’s total value is now £1.29 trillion, up 55% in five years with number of homes in the sector up 28%. Net wealth passed £1 trillion in 2015, overtaking that held by mortgaged owner occupiers for the first time.
The total value of homes in London exceeded £1.5 trillion for the first time at £1.612 trillion, accounting for more than a quarter of the total value of housing stock in the UK and having risen by £589 billion in five years.
The South of England saw total value growth of £179 billion, exceeding London growth for the first time in five years while Bristol saw the biggest increase in total housing stock value outside of London, up £4.5 billion to £44 billion.
The report points out that residential property has become an increasingly important store of wealth. Total equity now stands at around £4.8 trillion net of borrowing, equivalent to over 2.7 times the GDP of the UK.
Over the past 10 years the total value of the UK’s homes has risen by over £1.6 trillion, but the biggest growth, almost £1.2 trillion, was seen in the past three years. This means the UK’s 28.2 million homes of all tenure now have an average value of £218,474, up 18.9% in five years.
‘Value and gains vary sharply according to location and ownership. Gains have been concentrated in equity rich markets, notably London and the south east, particularly benefitting those who own their homes outright. In 2015, for the first time, the total value of owner occupied homes without a mortgage exceeded the total value of those with a mortgage,’ said Lucian Cook, head of residential research at Savills.
‘While the difficulties faced in getting on and trading up the housing ladder and the consequential rise in private renting is well documented, these figures show the scale of the change and challenges faced by Government,’ he added.
London and the South East accounted for 57% of total value gains at £218 billion in 2015 and now have a total value of almost £2.8 trillion. This means that 26% of the UK’s homes now account for 45% of the total value, and takes the average value of a home in London to £430,436 and £284,805 in the South East.
At the other end of the spectrum, the total value of homes in the North East equates to less than a tenth of London’s value, having risen just 2.2% in 2015. At a total of £135 billion, the region’s value remains 9% down on 2005, its market having remained constrained by weak economy and very low levels of equity.
Beyond London, Bristol was the standout performer in 2015, with the total value of its housing stock up £4.5 billion, to £44 billion, the biggest increase for any single local authority or unitary authority beyond London. St Albans, Reading, Wokingham and Milton Keynes also saw strong growth, a reflection of how price growth has become refocused to the commuter zone.
Birmingham and Manchester, the focus of much investment and policy attention, both saw stronger value growth than in 2014.
Owner occupied homes are far the largest store of value, at £4.16 trillion, but the private rented sector now accounts for property worth £1.29 trillion, surpassing the value of mortgaged owner occupier stock for the first time in 2015.
Some 8.4 million owner occupiers with no mortgage outstanding on their property now own homes worth around £2.1 trillion, equivalent to almost £250,000 per household, and the total value of this equity pot has risen 22% in the past five years.
By contrast, the number of homes with a mortgage has fallen post credit crunch, down 8.7% to 8.3 million, as people have struggled to access or climb the housing ladder. As a result, mortgaged homes have seen total value growth of just 7% to £2,063 billion. Almost half this value, some £996 billion, is held in a mortgage.
By contrast, the private rented sector has continued to expand and has become the fastest growth sector by value, totalling almost £1.3 trillion. The number of private rented homes has risen 28.3% since 2010, to almost 5.7 million, while total value is up 55%.
Across Great Britain some 17.8 billion households who do not own their homes outright share a total annual housing bill of £148 billion, split roughly 50:50 between mortgage costs) by owner occupiers and rent, both private and affordable.
‘While the very low cost of interest has suppressed the cost of ownership, the backdrop in terms of accessibility to mortgage debt means an increased proportion of total housing costs is being taken up by private rent,’ said Cook.
London accounts for just over a quarter of this total cost at £37.8 billion, having increased by 46% over the past five years, with the average annual cost per household now £11,404, with rent accounting for almost two thirds of this total.
The South East and East are the only other regions where the average annual cost per household exceeds £5,000 per household at £6,923 and £5,895 respectively.
‘Average housing costs in London are now twice the UK average, which is a threat to its competitiveness and makes other major urban locations look increasingly attractive by comparison,’ added Cook.
