Property News > Homeowners in the UK are Overestimating the Value of their Properties

Homeowners in the UK are Overestimating the Value of their Properties

We’re all houseproud, but is it having an impact on perceived house prices as people over-egg the values of their homes across the UK?

According to studies, one in five homeowners are estimating the cost of their home to be higher than the average, finding that overall Brits claim the average cost of a home is £288,263, around £50,000 higher than the average cost.

At present, the average cost of a home is £235,673 and has been rising despite the pandemic, with renovations and home improvements being a driving factor in people believing their home is worth more.

Over the last six months, 85% of people in the UK have made improvements to their home, with six in 10 claiming to have made significant purchases to improve their properties.

Where are People Overvaluing their Home?

When it comes to where in the country people are most overvaluing their homes, our research found that people in the North West were adding as much as 44% to the value of their property, with homeowners claiming on average their homes to be worth £242,449, compared to the £168,261 they are actually worth. 

The North East wasn’t far behind, with homeowners ramping their prices up by 39.4%, from the actual average of £134,545 to £187,533. Residents in both Wales (+32.3%) and Yorkshire (+31.7%) also believed their property to be worth around a third more than the official statistics.

In fact, only one area of the UK undervalued the price of their properties in comparison to official UK house prices, with Londoners valuing their homes at 5.1% lower at 454,764 compared to £479,018.

RegionOfficial Average House PriceHomeowner Average House PriceDifference
East Midlands£197,505£231,268+17.1%
East of England£290,621£326,653+12.4%
London£479,018£454,764-5.1%
North East£134,545£187,533+39.4%
Northern Ireland£140,580£177,454+26.2%
North West£168,261£242,449+44.1%
Scotland£154,648£189,844+22.8%
South East£324,659£375,202+15.6%
South West£261,006£304,387+16.6%
Wales£169,436£224,068+32.2%
West Midlands£203,658£261,518+28.4%
Yorkshire & Humber£170,198£224,067+31.7%
UK£235,673£288,263+22.3%

As you can see, every region in the UK has overestimated the average value of their home by at least 10% except London. Removing London would see the 22.3% national increase even higher, which is perhaps worrying when it comes to seller expectations.

Homeowners Optimistic Following Covid-19

Homeowners have been largely optimistic in the midst of the pandemic. Around half of Brits believe the value of property has stayed the same, although a quarter believe it may have slightly decreased in value. If that is reflected in the estimated values above, then prior to the pandemic Brits could have been overestimating the value of their property significantly more.

Home improvements during Covid-19 have been significantly higher than outside of the pandemic with the home office becoming an increasing trend due to the rise of homeworking and the expected flexibility that will follow that when restrictions begin to lift. On average one in 10 homes have seen a room adapted to enable home working, with 5% of homes adapting an outhouse of some sort to enable home working, and with home offices at the top of the wish list for buyers in 2021, it could be contributing to that overestimated perceived house price.

House Prices in 2021

For homeowners who are overestimating the worth of their property, it could be a fragile game they are playing, with the end of the furlough scheme and stamp duty holiday fast approaching. Over the last few months as that edges closer, house prices are seeing a drop. That figure was 0.3% between December and January and the annual growth rate has also slowed. 

A number of experts believe that the housing market could slow quickly if the government doesn’t extend the stamp duty holiday, especially if unemployment continues to rise, which is a realistic possibility once furlough does come to an end. 

Many are calling for a tapering of the holiday, with it being phased out gradually which could help matters, but it will certainly be interesting to capture public perception come Spring 2021 and whether the perceived value of homes is still significantly higher than a slowing average house value.

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