UK housing costs hit £200bn for the first in 2023 for the first time, according to analysis from property firm Savills.
The analysis, which looked at private and social rents plus owner-occupier mortgage costs over the course of 2023, revealed an increase of £22bn in housing costs on the year.
Savills said housing costs in the UK have risen by a total of £34.3bn in the last two years, three times more than had been seen in the preceding five years.
The research added that this growth 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.
Lucian Cook, head of residential research at Savills, pointed out that the increase in housing costs has been “unevenly distributed”.
She explained that more younger households were 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,” she added.
Mortgage homeowners vs renters
The research also found that, in total, the bill for 8.43mn mortgaged owner-occupiers reached £98bn in 2023, up £13.9bn on the year - an increase of 17 per cent.
These increased costs were primarily driven by growth in mortgage interest repayments which rose by 34.6 per cent on the year, 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.
This was primarily driven by a 10.6 per cent increase in private rental costs while costs for social renters grew by a lesser 4.1 per cent on the year.
Cook explained that homes to rent were in short supply but demand remained high which, when combined with robust wage growth, fueled 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’,” she said.
“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.”
Regional disparity
Savills also reported a regional disparity in housing costs, identifying London as the area which saw the biggest increase in costs in 2023, rising by 14.5 per cent to over £6.2bn.
This was followed by the South West, which saw an increase of 13.5 per cent, 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 per cent.
Overall, London was found to be bearing the biggest brunt of the housing bill, accounting for a quarter of all housing costs, and a third of all private rental costs.
Additionally, it was found that London’s private rental bill exceeded £25bn in 2023 and now makes up more than half (54 per cent) of all housing costs in the capital for the first time.
However, the South East bears the highest owner occupier housing costs - totaling £18.3bn, £1bn more than London.
tom.dunstan@ft.com
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