The growth in house prices over the past three years, driven in no small part by the well-documented ‘race for space’, has added considerably to the paper wealth of homeowners.

According to our latest research, the total value of all homes across the UK reached a new £8.68 trillion high in 2022. And with outstanding mortgage debt standing at £1.66 trillion, according to the latest Bank of England records, net housing wealth exceeded £7.0 trillion for the first time last year.

Though annual growth was lower than in the two preceding years, at £425 billion, it means a significant £1.625 trillion has been added to UK housing value over the past three years. 

Who has benefited?

Owner-occupiers have been the biggest beneficiaries of values growth since 2019, surpassing uplifts enjoyed by landlords.

Almost +40 per cent of growth over the past three years has been enjoyed by those who have paid off their mortgage debt, while mortgaged owner-occupiers accounted for +34 per cent of the increase.

This uplift has been driven by the fact that we are continuing to see those who benefited from the homeownership boom of the latter part of the 20th century joining the ranks of the mortgage-free. Additionally, there has been a modest uptick in the overall number of mortgaged homeowners, primarily driven by increased first-time buyer activity over the last couple of years.

At the same time, we’ve seen pressure 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 of the private rented sector, reversing a five-year trend.

Over the five years to the end of 2022, the value of private rented stock rose by £222 billion, while mortgaged owner-occupier homes added a total £669 billion to their value.

Which regions have seen values rise the most?

Over the past three years the biggest growth in value of housing stock in monetary terms was in South East England – with its rural and coastal hotspots especially popular during the pandemic-induced race for space. Here the overall value rose by £316 billion between 2019 and 2022 – exceeding the growth seen in London over the same period by £93 billion.

But looking at 2022 alone, the biggest percentage growth was in the South West where the value of housing rose by +8.6 per cent or +£67 billion.

What will happen next?

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.

We know that buying activity peaks among those in their 30s, with under-45s accounting for the majority of purchases (59 per cent). These buyers require more finance – but recent interest rate rises will put pressure on first-time buyer and second stepper budgets in 2023 and 2024.

Combined with the prospect of lower levels of house building, we expect that 2022 will remain a high watermark for the values of the nation’s housing stock, for a few years at least. Savills house price forecast anticipates that prices across the UK will fall by -10% by the end of 2023 when interest rates peak. But, on the assumption that interest rates gradually ease back from the middle of 2024, values are expected to rise by a net figure of +6% in nominal terms over the next five years.

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Further information

Contact Lucian Cook

Savills Research