12 in 13 homeowners enjoyed value gains in 2022, could you be one of them?

2022 started well…

2022 was a year of two halves for UK housing.

It kicked off with a strong start thanks to record-low mortgage rates and a continuation of the pandemic-driven desire to move.

These factors, combined with a chronic lack of homes for sale, meant house price growth remained strong up until the summer.

And looking across the year as a whole, 12 out of 13 homeowners saw the value of their home increase by an average of £19,000.

Among them, nearly 3 million homeowners made more than £50,000.

How much value did your home gain?

But then things started to change…

In the second half of the year, the picture became less rosy.

Rising living costs and a jump in mortgage rates halved the demand for homes, causing the rate of house price growth to start slowing rapidly.

In some areas of the UK the value of individual homes is now falling, writing off some of the recent pandemic gains.

How much value are homes losing?

Of the UK’s 30 million homes, 16 million experienced value losses by the end of 2022.

But for the majority of these homeowners, the drop is small. The average value reduction in the final 3 months of 2022 was £3,900.

When compared to the average value gain of £19,000 over the course of the whole year, this leaves most homeowners comfortably in the black for 2022.

And that figure becomes even smaller when noting the average home gained £32,400 during the first two years of the pandemic.

Within the group of 16 million homeowners experiencing value losses in the last 3 months of 2022, only 2.3 million (or 8%) registered a loss over the year.

For these homeowners, that average loss was £7,300.

And more than 26% of those homes were in London.

We estimate that 1 million homes lost all of the value their properties gained in the two years leading up to February 2022.

But these homes were found in areas where prices didn’t increase much during the pandemic in the first place, such as the capital, the South East and Scotland.

A further 7.3 million homeowners lost part of their pandemic paper gains in the last 6 months of the year.

However, while home values are starting to decline in some areas, in contrast to the national headlines, our price estimates for the UK’s homes reveal that 14 million properties saw their values increase in the final 3 months of 2022.

Where are homes losing value?

The reduction in home values over the second half of 2022 was concentrated in markets where price gains have been slower over the last year.

Homeowners in London have seen the largest number of reductions, followed by the South East.

The average reduction between June and December was £8,400 in London and £5,200 in the South East.

However in both these areas, more homes increased in value than fell, showing how the pressure on values is highly localised.

Outside of London and the South East, we found that three-quarters of homeowners saw the value of their home increase by an average of £6,600.

And price falls in these areas were modest, averaging £3,800.

Which areas are in demand right now?

In the latter half of 2022, some markets were faring better than others.

Our latest House Price Index found that affordable cities and suburbs continue to see strong demand for homes, while the outlook is weaker for the more expensive markets and rural locations.

Why are homes losing value?

Home values are starting to fall back because of weaker demand in the final 6 months of 2022.

Rising mortgage rates and cost-of-living pressures are causing some potential home movers to press pause for now. And a reduction in demand leads to a reduction in upwards pressure on house prices.

But while the number of homes losing value is growing: rising from 8 million in between July and December 2022 to 16 million in the 3 months to December 2022, it’s crucial to remember that these price reductions are fairly modest compared to the gains made in recent years.

What’s going to happen to home values in 2023?

The scale of value reductions has been relatively small so far but is likely to grow further in the first part of 2023.

We’re expecting to see national house price falls of around 5% for this year.

Homeowners who lose value may be put off moving or need to look at alternatives like cheaper homes or lower-value markets for their next move.

That said, we’re still expecting 1 million property transactions to take place this year as the pandemic-driven search for space continues. The ability to work from home remains for many office workers, which has opened up the location landscape for many.

Those in retirement, who may be cash buyers or looking to downsize, will also continue to look for new homes and cost-of-living adjustments are likely to motivate people to find new properties that are cheaper to run.

How can I find out what’s happening to house prices in my area?

The outlook for home values depends very much on the individual home and the market it sits within.

It’s important that homeowners don’t focus too much on national trends in prices, but rather what’s happening in their area locally.

Key takeaways

  • Despite a turbulent second half to the year, 92% of homeowners enjoyed value gains on their homes in 2022
  • The average capital gain was £19,000
  • However, weaker demand from July onwards meant that nearly 1 in 3 saw the value of their home decline by an average of £4,400 from July to December