Our £3.8 Trillion Nest Egg

The value of privately owned homes reached new heights last year. Here's how the UK's housing wealth stacks up.

According to a new report from Halifax, the UK's largest mortgage lender, the value of privately owned homes in the UK hit a record £3,781 billion at the end of 2006.Halifax revealed that the value of our housing assets increased by £410 billion in 2006, up over 12% on 2005's figure of £3,371 billion. What's more, as house prices have risen faster than underlying mortgage debt, our household balance sheet is in good shape, as the following table shows:Year-endPrivatehousingassetsMortgageDebtHousingequityIndebtedness (%)19961,2084107983420012,1255911,5342820063,781(est.) 1,0762,71528Sources: Halifax, Bank of England. All values in £bns.So, as you can see, the value of private-sector housing assets has more than tripled over the past decade, yet mortgage debt presently accounts for under three-tenths (28%) of this figure. This suggests that, as a nation, we are not overstretched, although homeowners with large variable-rate mortgages won't have welcomed the recent base-rate rises!Much of our housing wealth is to be found in cities, which account for £1.3 trillion, or more than a third (35%) of overall housing assets. As you'd expect, London leads the way with £649 billion, or more than a sixth (17%) of the UK total. What's more, the Halifax found that the North-South divide is narrowing, at least in terms of housing wealth. In 2001, the share of housing wealth was weighted 62%/38% in favour of the South. Thanks to strong house-price growth in the North, this split is now down to 55%/45%.Over the past five years, housing-stock value has increased by 78%, whereas general inflation (the tendency of the cost of goods and services to rise over time) has climbed by a mere 14% over the same period, as measured by the Retail Prices Index (RPIX). For the record, here's how housing wealth has soared across each region of the UK in the past five years:RegionFive-yearincrease(%)Northern Ireland165North130Yorks & The Humber125Wales122North West114East Midlands98Scotland97West Midlands90South West68East Anglia67Greater London53South East52UK78So, although price rises have been more modest in the South East, Greater London, East Anglia and the South West, hyper-growth outside of southern England has driven up the average rise to 78% over five years. This amounts to 12.2% a year compounded, which is far in excess of the long-term average of around 8.5% a year.Finally, my main concern is that so much of the UK's wealth is now riding on property. For example, private holdings of financial assets (such as shares, deposits and bonds) amount to £1.7 trillion. With housing wealth weighing in at 2.2 times as much, many people will suffer when the wheels finally fall off the property bandwagon!More: Want a cheaper home loan? Then try the Fool's award-winning, no-fee mortgage service!Disclosure: Cliff owns shares in HBOS, parent company of the Halifax.