UK housing market sees first value drop in a decade

The total value of all homes across the UK has dipped for the first time since 2012.

According to figures by Savills, the total value of UK homes now stands at £8.678 trillion.

The analysis of the UK’s housing stock reveals that the total value has fallen marginally on 2022 – when values peaked – but remains £1.585 trillion higher than before the pandemic (2019).

Higher mortgage costs

According to Savills, the value falls, were concentrated mainly in the south. The total value of London’s housing stock decreased by -£39.3 billion (-2.1%), while the South East, South West and East of England saw a combined -£16.5 billion (-0.5%) fall.

By contrast, markets further from London saw values increase over the year. The most significant uplift was in Northern Ireland (3.2%), North East (1.4%), Scotland (1.3%) and the East Midlands (1.3%).

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 £1.652 trillion, our figures show that net housing wealth continued to exceed £7 trillion; a figure 2.6 times the size of the UK’s economy.”

Affordability pressure to ease

Mr Cook adds economic pressures should begin to ease soon.

“In 2023 the total value was supported by an £80 billion 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.

“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.”

Constrained supply in the PRS

The analysis shows that the value of property held by mortgage-free owner-occupiers has increased by £1.505 trillion (£1,505 billion) over the past decade, while that held by mortgaged owner-occupiers has risen by a lesser £978 billion.

Mr Cook adds: “Back in 2013, the value of housing held by unmortgaged and mortgaged owner occupiers was very similar.

“However, demographic changes and a shift in access to home ownership have substantially widened the gap between the two in the last 10 years.”

Mr Cook says many people in the private rented sector still face challenges.

He said: “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 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.”

Total of UK Housing Stock by Tenure £bn

*valued on an investment basis having regards to tenants’ occupational rights

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