UK homeowners collectively undervalue their homes by £237bn

Over two thirds of homeowners have lost touch with the value of their home ..

New analysis by Zoopla, the only property portal which offers a free instant online property price estimate, conducted as part of its inaugural Hidden Equity Survey, has found that UK homeowners are undervaluing their homes by a combined £236.8 billion. The Hidden Equity Survey of 2,000 UK homeowners who have had their home valued by an estate agent in the past three years establishes for the first time how accurate UK homeowners’ estimations of the value of their homes really are. It found that just three in ten homeowners have an accurate idea of the estimated value of their home.

The findings from Zoopla show that almost half of UK homeowners (45%) who had their home valued via an estate agent or sold it in the past three years said it was worth more than they thought it was – on average by £46,305.  By contrast, just a quarter said their home was worth less than they thought, by an average of £44,313.  When all the results of the survey are taken into account, the net result is that the average home in the UK is worth £9,470 more than its owner realizes. Multiplied by the 25 million private homes in the UK, this indicates that UK homeowners are sitting on a staggering £237bn of hidden equity.

For many homeowners, the disparity between perceived value and an actual valuation from an estate agent was far higher. Nine percent of homeowners whose property was worth more than they expected found that it was worth over £100,000 more, with 40% of these located in London and the South East. This equates to over 1 million properties nationwide carrying six figures of hidden equity. 

Looking at London in more detail, 35% of homeowners in the capital found their property to be worth more than they expected, by an average of £117,000. When all of the survey results are taken into consideration, the average London property is worth £22,846 more than its owner anticipated (more than double the national average of £9,470 cited above). 

Nationally, over a fifth (21%) of those whose home was worth more than they realized said they simply couldn’t believe what their home was worth, whilst six per cent said they felt as if they had ‘won the lottery’ when they realized the scale of the equity hidden within their home. A further 31% said they were ‘overjoyed’.

For those who went on to sell their home and benefit from their hidden equity, the unexpected windfall had a significant impact, with eight in ten (81%) saying the additional money ‘improved their lifestyle’. Exactly half (50%) said they were able to move into a better property than they expected as a result (for example, it had more bedrooms, was in a nicer area, had a garden etc.), and nearly a fifth (18%) of those aged between 55-64 said they were able to retire earlier than expected. For those able to retire earlier than expected, it was on average by over three years.  

There were many other lifestyle benefits for those who sold their home for more than they expected. Over one in eight (13%) were able to upgrade their car, the same amount (13%) went on more holidays, and nearly one in ten (8%) were able to help get their own children onto the property ladder. 

For the seven in ten who did not know the true value of their home until they got it valued by an estate agent, nearly half (45%) said they would have made different financial decisions in the years prior if they had been aware of their hidden equity. Nearly half of those again (21% of respondents) said they would have made ‘significantly’ different decisions.  Among those whose home was worth less than they expected, nearly a third (31%) said they would have worked harder to build their savings rather than assume their home was accruing equity that they could draw on at a later date, and 12% said they would have put more money into their pension. In addition, 15% said they would have spent less on holidays, 12% less on cars, and 15% less on non-essential luxury purchases such as jewellery or watches. 

Gráinne Gilmore, Head of Research at Zoopla, comments: “Property prices have long been a hot topic at dinner tables up and and down the country, and this new survey makes clear that many homeowners may be in for a nice surprise if they check the current value of their home. The effects of the pandemic over the last 12 months have been felt in the housing market, with many households reassessing how and where they want to live. There is soaring buyer demand but this is not currently being matched by homes being listed for sale. Homeowners considering a move could be in pole position in their local market if they offer their property for sale, and could be set to unlock hidden equity.” 

Leave a Reply

Your email address will not be published. Required fields are marked *