Savills : UK homes worth a record £6.8 trillion as private housing wealth exceeds £5 trillion

The UK's housing stock is now worth 3.65 times Britain's GDP, says Savills in new analysis published today. Key findings:

• UK housing stock value stands at a record £6.79tn, up £491bn in 2016 and £1.86tn in 5 years

• Private housing equity topped £5tn for the first time

• Outer London outpaced central London, with Barnet recording highest growth

• SE outperformed London with Slough (+20%) the star commuter location

• Parts of the north of England face further wait to recover pre credit crunch value

• Economic uncertainty and mortgage regulation mean future generations will struggle to accumulate housing wealth

The total value of all homes in the UK rose to a record £6 trillion last year, as growth of £491 billion underscored housing's status as the UK's greatest store of wealth, according to latest analysis from international real estate adviser Savills.

Privately held housing wealth has passed the £5 trillion (£5,000,000,000,000) mark for the first time. Gains continue to favour owner occupiers with low or no borrowing and private landlords, as total mortgage borrowing remained virtually unchanged last year.

'Over the past three years, low interest rates and strong consumer sentiment have combined to deliver very strong value gains,' says Lucian Cook, head of residential research at Savills. 'But we are unlikely to see this pattern repeated. Economic uncertainty in the short term and more rigorous stress testing of mortgage lending in the longer term, will hold back house price growth and limit the ability of future generations to accumulate housing wealth.'

The geography of housing wealth - value growth more evenly distributed

London and the South East again showed the strongest growth, but gains are more evenly distributed than at any point since the global financial crisis. Over the past five years, these two regions with just a quarter of all UK homes, have accounted for well over half the UK's total value growth. In 2016 their combined value crossed the £3 trillion line.

By contrast, the Midlands, North, Wales, Scotland and Northern Ireland combined have 57 per cent of all homes but just over a third (36%) of the value, as housing market recovery in locations further from the capital continues to lag.

But there are signs of change and new star performers are emerging:

• The South East closed the gap on the capital for the first time since 2004 as London growth began to slow. Homes in the South East added £121 billion to their total value in 2016 compared to £112 trillion in London

• The most expensive boroughs - Kensington & Chelsea, Westminster, Hammersmith & Fulham, Richmond and Camden - lost £9.6 billion (9%) of their £105 billion 5-year gains due to the increased stamp duty burden. This was more than made up by growth in outer London driven by buyers seeking more affordable housing

• A total of £35 billion was added to the housing stock of Barnet, Croydon, Tower Hamlets, Brent and Havering in 2016, with Barnet recording the highest growth, adding £8.9 billion in housing value

• Slough was the standout performer beyond London, rising 20 per cent to total £15.6 billion, as the search for value and connectivity to the capital boosted buyer demand

• Bristol, +£6.6 billion in 2016, passed the £50 billion mark for the first time

• Cambridge, + £8 billion in 5 years, is now worth £20 billion

• York, +£3.9 billion in 5 years, is now worth almost £20 billion

• Birmingham suburb Solihull, +£2.6 billion in 2016, is now worth over £25 billion

But there are still laggers, in particular parts of the north of England, where weaknesses in the local economy suggest house price recovery is still some way off. This is seen in locations such as Hartlepool, where housing value fell by £76 million and Burnley, down £122 million over the past five years despite a £217 million boost in 2016.

Housing wealth more concentrated in fewer (and older) hands

The big winners over the past five years have been owner occupiers without a mortgage and private landlords. Owner occupied homes are far the largest store of wealth, accounting for almost £4.6 trillion of housing value. But it is home owners without mortgage borrowing who have accumulated far the most housing wealth, up 42 per cent in five years compared to 19 per cent for those with a mortgage, in part due to existing owners paying down their borrowing.

Private landlords, who account £1.4 trillion of housing value and almost £1.2 trillion of net housing wealth, saw the total value of their properties rise 64 per cent in the past five years, a combination of increased stock levels and rising demand from younger households unable to access home ownership.

But the really stark figures are revealed by looking at how owner occupiers' housing equity is split across the generations. The over 65s now hold £1.42 trillion, or 43 per cent of all equity held by owner occupiers.

By contrast, the under 35s - the generation struggling the most to access home ownership - hold just £70 billion (5%) of that equity pot, while the 35 to 49 year age group alone account for around a third (>£500 billion) of all owner occupier debt.

'Housing equity has always been weighted to older generations who have paid down their mortgages,' says Cook. 'But since the credit crunch we've seen the generation gap widen significantly as younger buyers increasingly struggle to get onto the housing ladder and older home owners live longer and accrue higher levels of equity through house price growth.

'High house price to income ratios and mortgage regulation suggest this pattern become even more entrenched in the next decade.'