Property boom pushes value of homes to record £3.8 trillion

The Guardian   15/01/2007

Angela Balakrishnan

The booming property market has pushed the total value of Britain's private homes to a record level, according to the country's largest mortgage lender.

The annual housing stock review from the Halifax showed the UK's private housing stock was worth pounds 3.8 trillion in 2006, up by pounds 410bn or 12% from the previous year. The rise is equivalent to four times the total budget for the National Health Service.

While underlying retail price inflation has only come to 14% over the past five years, the value of residential housing has climbed by 78%.

The latest figures will add weight to calls from campaigners and economists who argue for a tax on property or land price gains. Last year, for example, inheritance tax and stamp duty raised only pounds 8bn, just 2% of the annual rise in housing value.

The steep climb in property values means housing equity now significantly outweighs mortgage debt. While housing assets jumped by more than pounds 400bn, mortgage balances increased by less than a quarter of this.
"The UK's household balance sheet is in good shape," said Tim Crawford, economist at Halifax. "Total housing assets [pounds 3.8 trillion] are now worth 3.5 times the overall level of housing debt. Ten years ago, 2.9 times was the equivalent figure."

A breakdown of the data revealed that Northern Ireland saw the strongest rise in the value of its housing stock over the past five years, up 165%. The north saw the largest rise of the English regions, with a gain of 130% over the same period. However, every region has experienced gains of at least 50% since 2001.

Cities accounted for over one-third of the value of total housing wealth at pounds 1.3 trillion. London makes up around half of that figure, helped by demand from City workers looking to spend their annual bonuses. But northern cities have seen the sharpest rises in recent years, with Lincoln, Kingston-upon-Hull and Salford leading the way. Despite robust price rises in London and the south-east, the report said the north-south housing wealth gap had narrowed in the past five years. In 2006, the south accounted for 55% of total housing assets, compared with 62% five years ago. However, the Halifax said the north-south divide had held steady during the past year.

Over the past five years the value of residential housing has increased by this percentage, against a 14% rise in retail prices.

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Date: 15/01/2007
Publication: The Guardian