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Could you become a property millionaire?

Could you become a property millionaire?

Category: Mortgages

Updated: 18/02/2016
First Published: 18/02/2016

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This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The pace of house price growth means that homeowners are pretty much guaranteed to make money on their properties if they stay there long enough, and even though recent figures show that the pace of growth has slowed slightly in recent months, prices are still only going one way – up.

In fact, new research from Santander Mortgages shows that the price of a typical UK home will almost double by 2030, rising from an average of £283,565 to a whopping £557,444. Not only that, but the number of homes worth more than £1 million is set to more than triple, so if your home is already worth a fairly hefty sum, you could see it skyrocket in the coming years.

Staggering growth

According to Santander's figures, there were a total of 499,803 homes valued at £1m+ in 2015, representing 1.77% of the total housing stock. However, this is set to rise to almost 1.6m (equating to 5.14% of UK homes) in the next 15 years, and unsurprisingly, the bulk of that will be driven by properties in London.

It's estimated that 25% of all homes in the capital will be worth £1m+ by 2030, with 947,606 properties set to reach this price bracket, up from 307,433 today (equating to 8.91%). However, the South East will take its fair share, too, with an estimated 7% of homes in this area (or 288,157) expected to be worth £1m+ in 15 years' time.

Conversely, less than 1% of properties in the North East, Yorkshire and Humber, North West, Scotland, Wales, Northern Ireland and the East Midlands will reach the £1m threshold, highlighting a clear geographical divide.

Affordability issues

It may come as little surprise that, with prices set to rise so rapidly, affordability could become an increasing concern in the years to come. Incomes aren't predicted to rise anywhere near as fast as house prices, resulting in a clear decline in affordability: currently, the average property price is 7.9 times the average income, but by 2030, this is expected to hit a multiple of 9.7.

Again, things are elevated in the capital which could make affordability pressures even keener for Londoners, as although house prices are already a significant 11.5 times the average income, this is predicted to rise to an eye-watering 16.5 by 2030.

Rising gap

While the pace of price growth could see many current homeowners become property millionaires in the next few years, it paints a worrying picture for those yet to get on the ladder, many of whom could be priced out of the housing market altogether.

As a result, the divide between "housing haves" at the top and the "have-nots" at the bottom will be even wider than it is now, said Professor Paul Cheshire, LSE Professor of Economic Geography, and even though property price inflation is beneficial for existing owners, it'll make entering the market more difficult still for new buyers. This "further highlight[s] the importance of the right timing, advice, support and financial planning", he said, and it's a sentiment that Miguel Sard, managing director of Mortgages at Santander UK, agrees with.

"Property price inflation will tip many existing homeowners into the million pound price bracket, but could also price some aspiring buyers out of the market if they don't have the right support," said Miguel. "The current property market is buoyant and the mortgage deals available to new and existing owners are extremely competitive, so those wishing to buy or move shouldn't be put off.

"Regardless of the price point a buyer is considering, our advice remains the same; do your research, find a mortgage provider that offers competitive rates and a range of products to ensure that the right deal is secured, and above all, ensure the repayments are affordable."

What next?

Use our mortgage calculator to gauge the kind of mortgages (and repayments) you can afford. Then you'll want to compare mortgage rates – they're at record low levels, so if you want to find a bargain, now could be a great time to get on (or move up) the housing ladder before price rises hold you back!

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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