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The total value of UK homes jumped 51% to a record £8.7trn last year, says Savills, but adds that this rise “will represent a high watermark for the value of the nation’s housing stock” for several years.

UK homes lifted by £425bn in 2022 compared to a year ago, a lower amount than the previous two years, but still contributing to a 23% surge in value since 2019.

“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,” says Savills head of residential research Lucian Cook.

Owner-occupiers have been the biggest beneficiaries of this growth, says the estate agency.

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It says almost 40% of the house value growth over this period was enjoyed by those who have paid off their mortgages, amounting to £645bn, while mortgaged owner-occupiers accounted for 34% of the increase, or £549bn.

Cooks points out: “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.”

But, he adds, over the last five years, landlords have come under pressure “due to increased regulation and taxation despite rising tenant demand”.

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From 2012 to 2017 the value of private rented stock lifted by £495bn, Savills estimates, more than the £443bn 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 £222bn, while mortgaged owner-occupier homes added a total of £669bn to their value.

The agent adds that over the next “four or five years” house values may ease due to the cost and availability of finance combined with lower levels of house building.

Cook says: “Recent figures from HMRC indicate that buying activity peaks among those in their 30s, with the under 45s accounting for 59% of all purchases.

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“While the purchasing power of older buyers is more determined by the housing equity they have accumulated, younger buyers require finance which means the mortgage markets are the engine room of the housing market.”

“Recent interest rate rises are going to continue to put first-time buyer and second-stepper budgets under pressure in 2023 and 2024.

He adds: “Combined with the prospect of lower levels of house building, we expect that 2022 will represent a high watermark for the value of the nation’s housing stock for a few years.

“At the same time, activity among younger buyers that has improved in recent years is likely to come under more pressure, which will present a particular challenge for policymakers.”

Savills drew its figures from the latest Bank of England records, which show that outstanding mortgage debt stood at £1.7trn, meaning that net housing wealth topped £7trn for the first time last year.

By Roger Baird

Source: Mortgage Strategy

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