The UK’s housing stock has seen its first annual decline in value since 2012 after some £27bn was wiped off last year, according to new analysis, amid higher mortgage costs and pressure on household finances.
Figures from property firm Savills showed that despite the fall, the value of housing remained £1.585tn higher than 2019, before the Covid-19 pandemic hit.
The overall value of homes across the UK came in at £8.678tn in 2023.
Lucian Cook, head of residential research at Savills, said: “Despite higher mortgage costs, the market’s resilience means UK housing continues to be a significant, and a relatively secure, store of wealth.
“Even after deducting outstanding mortgage debt of £1.652tn, our figures show that net housing wealth continued to exceed £7tn.”
He added: “In 2023, the total value was supported by an £80bn uplift from new housing delivery. But, more fundamentally, the market was insulated from interest rate pressures by a combination of more stringent mortgage regulation, the increased use of fixed-rate mortgages and the assistance provided by lenders to those in financial difficulty.”
Savills said homes owned outright now account for nearly 40 per cent of the total housing value.
Its analysis signalled that the value of homes held by owner-occupiers that were mortgage free rose £1.505tn over the last decade, compared to a £978bn rise for mortgaged owner-occupiers.
Cook said: “We continued to see people who benefited from the homeownership boom of the latter part of the 20th century joining the ranks of the mortgage-free in 2023. But at the same time, aspiring homeowners had to contend with a combination of high deposit requirements and increased mortgage costs last year.
“Meanwhile increased taxation and regulation have constrained supply in the private rented sector housing, despite rising tenant demand.”
Reasons to be cheerful?
The housing market was dogged by uncertainty last year, but there are already green shoots appearing in 2024.
Latest figures show house prices are rising, and the juicy £2.5bn megamerger between Barratt Developments and Redrow has boosted the sector.
Cook added: “We may see the cost of mortgages ebb and flow over the course of 2024, as markets respond to changing expectations of when and how much the Bank of England will cut the base rate. But over the medium term, we expect affordability pressure to ease, meaning that the recent loss in value should be short-lived.”
Savills’ research suggested that the overall fall in value last year was mainly driven by southern England, whereas Scotland, Northern Ireland, northern England and the Midlands saw valuation uplifts.
Housing value by region
RegionHousing stock valueChange from 2022London£1.825tnMinus £39.3bnSouth East£1.630tnMinus £6.1bnEast of England£975bnMinus £6.4bnSouth West£845bnMinus £4.0bnNorth West£680bnPlus £3.0bnWest Midlands£607bnPlus £5.2bnEast Midlands£514bnPlus £6.5bnYorkshire and the Humber£489bnPlus £3.8bnScotland£481bnPlus £6.2bnWales£299bnMinus £2.8bnNorth East£186bnPlus £2.5bnNorthern Ireland£147bnPlus £4.6bn