In the United Kingdom, the total value of homes has reached an unprecedented level of £8.68trn at the end of 2022, marking a 5.1% year-on-year increase, according to recent research conducted by real estate giant Savills.

Lucian Cook, Savills' head of residential research, highlighted that the growth in house prices over the past three years has contributed significantly to the paper wealth of homeowners. This is in part driven by the well-documented "race for space" over the same period. However, while the annual growth was lower than the two preceding years, over the past three years, £1.625trn has been added to the UK housing value.

Of this, nearly half was held by mortgage-free homeowners, marking a record high of £3.34trn. Surprisingly, net housing wealth surpassed £7.0 trillion for the first time last year, equivalent to almost 81% of the total value of UK housing.

It is worth noting that owner-occupiers have been the primary beneficiaries of this value growth. Almost 40% of the growth over the past three years was enjoyed by those who had paid off their mortgage debt, with mortgaged owner-occupiers accounting for 34% of the increase.

Cook emphasized that a few critical trends have created a shift in who has benefited from house price growth over the past five years, concentrating the greatest gains in the hands of owner-occupiers. Savills estimates that from 2012 to 2017, the value of private rented stock grew by £495bn, somewhat more than the £443bn growth in the value of homes owned by mortgaged homeowners.

However, over the five years leading up to the end of 2022, the value of private rented stock rose by a much lower £222bn, while mortgaged owner-occupier homes added a total of £669bn to their value.

Looking ahead, Cook predicts that the cost and availability of mortgage debt will be crucial to the shape of the housing market over the next four or five years. The recent interest rate rises are likely to put first-time buyers and second steppers under pressure in 2023 and 2024.

Savills also expects that 2022 will represent a high watermark for the value of the UK's housing stock for a few years. This is because the combined prospect of lower levels of house building and pressure on younger buyers' budgets is likely to present a challenge for policymakers.