62 per cent of total UK wealth is due to property prices
House price rises have tripled the value of UK wealth in the past two decades to a new record high of £8.8trn.
That’s the net figure – assets minus debts – estimated by the Office for National Statistics for the “total value of the UK, its homes, streets, pension funds, even its social clubs” at the end of last year, reports The Times.
It’s “equivalent to an average of £135,000 per person, or £327,000 per household”, the paper adds.
House prices have been the main driving force of increases in recent years, with the estimated value of the UK’s homes up from £1.2trn to £5.5trn between 1995 and 2015, says The Guardian.
Residential property is estimated to have increased seven per cent in 2015 alone, adding £355bn to the value of UK housing stock. Figures for June put the annual rise at 8.7 per cent, but this is likely to slow following the vote for Brexit.
Property now makes up 62 per cent of net wealth – but its advance has masked a deteriorating picture in other areas, including declining saving and growing debt.
Businesses are also indebted on a net basis, with financial firms such as banks reporting a deficit of £46.8bn and companies in other sectors holding £931bn more debt than assets, although this was down £175bn last year.
Without these drag effects, household net wealth would stand at £10.2tn, reports the Daily Telegraph, despite liquid assets such as savings and investments declining and being more than offset by financial liabilities.
The Guardian says growth in UK fixed assets such as property has been the fastest in the G7 group of rich nations, but its decline in financial wealth is joint worst, alongside Italy.
House prices accelerated in June despite the uncertainty created by the EU referendum, says a new report.
The Office for National Statistics’ (ONS) latest house price index reports valuations rose 8.7 per cent year-on-year, up from 8.5 per cent in May.
On a monthly basis, property rose one per cent, adding £17,000 to the average value from the same month last year. The average cost of a UK home is now £214,000.
Unlike some other sector surveys, the ONS index includes both newbuild and cash sales and is a more comprehensive review of the market, notes the BBC.
However, it is also based on completed sales and so says little-to-nothing about the trend after the vote for Brexit.
Evidence from the likes of the Royal Institute of Chartered Surveyors (Rics) suggests transaction volumes and house price growth have declined since the end of June but that prices are still moving positively amid a profound housing shortage.
Richard Snook, a senior economist at PricewaterhouseCoopers, told the Daily Telegraph: “In our main scenario, average UK house property growth will decelerate to around three per cent this year and around one per cent in 2017.
“Cumulatively, our estimates suggest average UK house prices in 2018 could be 8pc lower than if the UK had voted to stay in the EU.”
London estate agent Jeremy Leaf, a former Rics residential chairman, said: “There is no doubt that there is too much concentration on pricing and not enough on transactions.
“Volumes will be affected by uncertainty at least until September… Transactions are more important than headline prices as it is important for the health of the market that people are moving and there is plenty of activity. This has more impact on the economy.”
In terms of the regional trends in the ONS figures, high-value central London areas were shown to be falling ahead of the referendum as successive tax changes hit demand. Kensington and Chelsea and Hammersmith and Fulham saw declines of 6.2 and 3.2 per cent since last year.
Aberdeen, which has been hit hard by a decline in the offshore oil sector, experienced the biggest drop with a slide of 6.8 per cent.
On the other hand prices were seen rising fastest in the Western Isles (up 28.1 per cent), where low volumes make trends volatile, as well as Slough (up 24.6 per cent), Luton (21.8 per cent) and the London 2010 Olympics borough of Newham (21.4 per cent).