Land accounts for over half the UK’s net worth

December 7, 2017 / Isla MacFarlane
Land accounts for over half the UK’s net worth

Following its split from other assets, land has shown to be the most valuable asset in the UK, accounting for just over half of the total net worth of the UK.

The value of land has grown rapidly from 1995, increasing by 412% compared with an average increase of 211% in the assets overlying the land, according to the latest ONS data.

Daniel Groves, National Accounts and Economic Statistics, Office for National Statistics, said, “Since 1995 the value of land has increased more than fivefold, making it our most valuable asset. At £5 trillion, it accounts for just over half of the total net worth of the UK at end-2016. At over £800 billion, the rise in the nation’s total net worth is the largest annual increase on record.”

In 2016, the UK’s net worth rose by £803 billion from 2015, an increase of 8.9%. The increase in net worth has primarily been due to the increase of £477 billion in non-financial assets in 2016; the largest single contributor to this is the value of land, which increased by £280 billion from 2015.

The value of land in 2016 is estimated to be £5.0 trillion, which is 51% of the total net worth of the UK. Land increased in value by £280 billion from 2015, a 5.9% increase. This is a notably smaller increase than in 2014 and 2015, when it increased by 15% and 10% respectively. Since the land underlying dwellings is a major contributor to the value of land, the House Price Index reflects this with house prices rising at a lower rate compared with 2014 and 2015.

In 2008, the value of land dropped by £913 billion, a fall of 23%. The main cause of this was a rapid decline in house prices during the year. As the cost of buildings remained almost constant in this period, this meant that the value of land was hit disproportionately hard. As house prices recovered, land began to increase in value in 2009 in contrast with many other assets, which began to suffer from the effects of the downturn.

While land has seen strong growth in the latest years, this is still lower than growth prior to the economic downturn. During 1999 to 2004, land value increased at an average rate of 18.3%, compared with an average of 8.1% in 2014 to 2016.

The value of the households sector increased by £750 billion in 2016, making it the greatest contributor to the change in UK net worth. Another large driver in households growth is the value of underlying land, which has risen by £266 billion in 2016. In comparison, the value of dwellings excluding land has risen by £51 billion. From 1995, the rate of growth of land value has far outstripped the growth of dwellings value.

Since 1995, the value of land in the households sector has risen by 544%, while the combined value of assets overlying land has risen by only 219%. This means that in 1995, the price paid for a dwelling was almost evenly split between the value of the land and the building. In 2016, the cost of the land has risen to over 70% of the price paid for a dwelling.

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