UK housing costs hit £200bn in 2023 for the first time

UK housing costs hit £200bn for the first time in 2023, research by Savills shows.

The analysis of private and social rents plus owner-occupier mortgage costs reveals a £22bn increase on the year, which occurred on the back of unusually strong rental growth and higher interest rates for those who were either on a variable rate, came to the end of a fixed-rate deal or moved home.

It means the nation’s housing costs have risen by a total £34.3bn in the last two years (+21%); three times that seen in the preceding five, according to Savills.

Lucian Cook, head of residential research at Savills, said: “The increase in housing costs has been unevenly distributed, with more younger households immediately affected by the rise in rental costs with many owner-occupiers on fixed rates remaining insulated from the turbulence seen in the mortgage markets.

“Although fixed rates have eased back recently, the delayed impact of rate rises will mean further increases in the nation’s housing costs in 2024 as more homeowners come off fixed rates, putting a further squeeze on household budgets.”

Savills estimates a further 1.2 million borrowers will roll of relatively cheap fixed rate mortgages in 2024. At the same time, the number of older households owning their home outright continues to rise, hitting an estimated 9.57million in 2024 across the UK.

Increases for mortgage homeowners vs renters

2023 total UK housing bill

versus 2022

versus 2021

Mortgage Interest

£38.6bn

+£9.9bn

+£12.2bn

Regular Mortgage Repayments

£59.4bn

+£4.0bn

+£7.5bn

Total Owner Occupier Costs

£98.0bn

+£13.9bn

+£19.7bn

Private Rent

£74.9bn

+£7.2bn

+£12.7bn

Social Rent

£27.0bn

+£1.1bn

+£1.9bn

Total Renters

£101.9bn

+£8.2bn

+£14.6bn

All Households

£199.9bn

+£22.2bn

+£34.3bn

Source: Savills Research

In total, the bill for 8.43m mortgaged owner-occupiers reached £98bn in 2023, up £13.9bn on the year (+17%), according to the research. Cost increases were primarily driven by growth in mortgage interest repayments, which increased (+34.6%) on the year (or +£9.9 billion), a figure capped by the increased use of longer term fixed rate mortgages.

In comparison, total costs to renters reached £101.9bn, a £8.2bn rise on the year (+8.8%). This was primarily driven by a +10.6% (or £7.2 billion) increase in private rental costs, while costs for social renters grew by a lesser +4.1% on the year.

“Homes to rent were in short supply in 2023 and demand high. This, combined with robust wage growth, fuelled an unusually high increase in the housing bill faced by tenants in the private sector.  While it’s difficult to see where an increase in rental supply will come from, rents in the private rented sector appear to be rapidly approaching an ‘affordability ceiling’.  This should slow the rate of growth, but renters will still be left spending a larger proportion of their income on rent than at any point in the last 18 years,” added Cook.

Division of UK Housing Costs

Outright owner occupiers

Mortgaged owner occupiers

Private sector tenants

Social and affordable renters

Number

9.57 m

8.43 m

5.80 m

5.32 m

Total cost to UK occupiers

£0.0 bn

£98.0 bn

£74.9 bn

£27.0 bn

Av. monthly cost per household

£0 pa

£11,615 pa

£12,988 pa

£5,080 pa

Source: Savills Research

Londoners bear the brunt of rising costs

London saw the biggest increase (14.5%) in housing costs in 2023 of over £6.2bn, followed by the South West (13.5%), as people moving  to the area increased their exposure to higher mortgage costs. The North East saw the smallest uplift, with costs increasing by 9.5%.

Overall, London bears the biggest brunt of the housing bill, accounting for a quarter of all housing costs, and a third of all private rental costs.

London’s private rental bill exceeded £25bn 2023, and now makes up more than half (54%) of all housing costs in the capital for the first time. However, the South East bears the highest owner occupier housing costs – totalling £18.3bn. This is £1bn more than London.

Total Housing Costs by Region

Total Housing Costs

Change since 2022

Northern Ireland

£4.0bn

+£0.5bn

North East

£5.4bn

+£0.5bn

Wales

£6.3bn

+£0.6bn

East Midlands

£11.0bn

+£1.1bn

Yorkshire and the Humber

£12.3bn

+£1.2bn

Scotland

£13.2bn

+£1.5bn

West Midlands

£13.8bn

+£1.6bn

South West

£16.5bn

+£2.0bn

North West

£16.9bn

+£1.6bn

East of England

£19.0bn

+£1.9bn

South East

£32.1bn

+£3.4bn

London

£49.4bn

+£6.2bn

United Kingdom

£199.9bn

+£22.2bn

Source: Savills Research

 

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