Its an old saying but every so often I’m reminded how incisive were Mark Twain and Disraeli before him and it’s usually when a tidal wave of numbers swamps my inbox as it has today. Data from The Halifax (saying that house prices haven’t changed in January), a survey from GE Capital (a big mortgage bank that says we have £2trillion of equity in our homes) and a barrel of numbers from the Office of National Statistics have come to confuse my brain.
I don’t intend to drown you too but there are a few numbers that could help us to make some sense of what is going on and that might also be useful in discussions in the pub or round the dinner table. If your discussions are like mine then a few statistics can be a real help (although an absence of them has never stopped us!).
There are about 25 million dwellings in the UK.
18 million are owner-occupied (up from 12 million in 1981!)
11.8 million have a mortgage on them.
Total value of housing in the UK is £4trillion
Total amount owed in mortgages is £1.1trillion
Property values have increased 3.4 times in the past 10 years but mortgages by only 2.8 times.
Of course there’s more. So much more but let’s just hang onto these few and see if we can get a bit of perspective. What they tell us is that less than half of all residential properties actually have a mortgage on them and that over 25% of home owners (owner occupiers) are mortgage free. No wonder that some people say they are bored by property prices and by speculation on interest rates.
Less than half the population have mortgages. The majority of people either own their own home or rent and of those who do have a mortgage, about 2 million got them in the past three years. These are the first people at risk from a downturn in house prices. If the value of your home is increasing then you might have a warm glow but the actual value usually only really matters if you buying or selling. It is at this point that you crystallise your gain (or loss) but there is one other time that the value matters and that’s if you want to re-mortgage.
Back to the stats.
The one I left out was the number of homes bought and sold in a year. The figure is about 1.2miilion – less in a year like this I expect and more in the bull times. This is important because it is these trades, just 3% of all homes that sets the price or value of all homes.
The market price of any commodity is derived from the prices at which that commodity is being bought and sold at any one time. It is the actions of just a few buyers and just a few sellers, be they repossessions or buy-to let landlords in the current market or speculators and developers that drive up prices in the boom times. This matters for everyone because it is these few trades which are recorded at the Land Registry and that valuers use to assess the worth of all property whether they have a mortgage on them or not.
That’s why house prices dominate the discussions in the clubs and pubs. It’s because they effect us all even if we don’t think we are in the market.