House prices are the go-to metric for measuring the housing market. The logic is that if the average cost of a UK home at the point of sale is rising, so is demand. Over the year to December 2023, government data shows house prices fell 1.4 per cent, the impact of higher interest rates having broken a decade-long streak of rising prices.
There is another way of looking at it. Rather than calculating an average house price based on data from some point in the sales process – at completion for the government numbers, at the mortgage approval stage for lenders Halifax and Nationwide, or from asking prices in the case of Rightmove and Zoopla indices – Savills has been measuring the market differently for over 20 years. According to its data, the total value of all UK homes as of the end of 2023, whether on the market or not, and whether owner-occupied, rented, or vacant, was £8.68tn, down 0.3 per cent from 2022 in the first fall since 2012.
This presents a slightly different view of the market. For those who consider a home an investment, whether because they are renting it or planning to sell it, home value makes more sense as a tracker of performance. After all, when real estate investment trusts (Reits) want to judge their portfolio value, they use holding value rather than the price at market sale. Likewise, homeowners are better off tracking the value of their investment instead of scrutinising the entire market for monthly changes in average price at the point of sale.