UK household wealth rises to over £10 trillion
Total household wealth in the UK reached an estimated £10.5 trillion last year, according to latest research from Lloyds Bank.
The lender’s private banking division said the rise represents an increase of £892 billion (or 9 per cent) from £9.6 trillion figure recorded in 2015.
The past decade has seen wealth held by households increase by £3.9 trillion (59 per cent) from £6.6 trillion in 2006.
The increase of £3.9 trillion in household wealth is equivalent to £143,059 per household since 2006.
This means the value of household wealth has grown faster (59 per cent) than both the Retail Price Index (up 33 per cent) and gross household disposable income (up 37 per cent) in the past decade.
Average house prices rose by 4.9 per cent during the year and an additional 183,000 homes were added to the stock of private properties (both owner occupied and those in the private rental sector). This resulted in housing wealth contributing an estimated £431 billion to the overall increase in wealth - accounting for 48 per cent of the total rise.
Having fallen in importance relative to financial wealth over much of the past 10 years, the contribution of housing wealth in the household portfolio mix has edged up in the past year from 41 per cent to 42 per cent in 2016. The proportion accounted for by financial assets is 58 per cent.
The total value of financial assets (such as bank and building society deposits, government bonds, shares in companies, life assurance and pensions) held by households increased by a similar amount - £461 billion or 8 per cent - in 2016. In previous years, the value of financial wealth has been driven by growth in the value of equities held by households in life assurance and pension fund reserves, which in 2016 grew by just 10 per cent.
Sarah Deaves, Private Banking Director at Lloyds Bank, said: “For many people, their overall wealth is locked up in assets that they hold for the longer term like their homes, their pensions, ISAs and investments. With rising house and equity prices, net worth has increased substantially in the past decade, growing by £143,000 per household on average. Increasing levels of wealth are clearly positive for households, but with recent changes, like pensions freedoms, it also highlights the increasing importance of proper financial planning, especially as people approach and move into retirement.”
Over half (57 per cent or £2.2 trillion) of the £3.9 trillion rise in household wealth since 2006 is accounted for by financial assets, which have grown by one-and-a half times in value from £3.9 trillion to £6.1 trillion. Life assurance and pension funds make up over three-quarters (77 per cent) of households’ total financial assets, and a further 21 per cent is in the form of deposits held with financial institutions.
During this period the market value of pensions has grown by £1.5 trillion (or 65 per cent) to £4.0 trillion whilst the value of equities and investment funds has grown by £31.3 billion (5 per cent) to £687 billion.
The increase in housing wealth has been driven by the £1.7 trillion rise in the value of the national private housing stock from £2.6 trillion in 2006 to £4.4 trillion in 2016. This rise, in turn, has been driven by growth in both average house prices – 51 per cent higher than in 2006 - and the number of privately owned homes - which grew by 9 per cent from 21.5 million in 2006 to 23.4 million in 2016.
While the value of the housing stock has increased substantially, growth in mortgage debt has slowed sharply since 2008. Mortgage debt in 2006 and 2007 grew at an average annual rate of £106 billion (11 per cent), but since then the annual rate has declined to just £16 billion (1 per cent).