House prices have been extremely difficult to track in recent months due to a lack of transaction data. But it seems people’s overriding optimism could be bumping up perceived house values across the country.
Almost every region in the UK is seeing people overestimate the value of their homes, according to a new survey from Aviva. The insurance firm asked a random sample of 2,318 homeowners to assess the value of their property, and 22% pitched their estimate over the average.
Respondents gave their average home value to be £288,263, while the UK average according to the government’s house price index is £235,673. The only area to underestimate the value of their homes was London. In the capital, people tended to think their properties were worth 5.1% less than they were.
Aviva also asked homeowners how they regarded their home’s value since the coronavirus outbreak. The overall picture was a positive one, with almost half (48%) saying they didn’t think house prices had been affected. Almost one in ten (9%) believe house prices have gone up either significantly or slightly since March.
On the flip side, around a quarter believe their properties have slightly dropped in value. A further 3% think this decline has been significant. But, Aviva points out, people are still just as keen as ever to invest in property.
“This has not deterred non-homeowners’ enthusiasm to get on the property ladder. Of those who do not own a property already, almost two thirds (63%) hope to own a home in the future and three quarters of this group (75%) feel it is ‘likely’ that this aspiration will become a reality.”
Renovations and property purchases changing homes
The report also looks at how people have invested more money in their homes during lockdown. It states that around 85% of UK residents have undertaken some form of home improvement over the past six months.
For some, this may have just involved purchasing new equipment, while for others, whole rooms may have been repurposed and modified. The survey shows that as many as 62% of household made “extraordinary purchases” during lockdown.
The typical household spent the biggest percentage (23%) of household purchase budgets on home improvement equipment. This includes things like paint and furniture to renovate rooms, and comes to around £75 per household. Other common items include toys, games and subscriptions, garden equipment and computer equipment and stationery, as well as office furniture.
It could be some of this investment that has led many to add value onto their home estimates. Particularly for those who have used lockdown to invest in decorating their homes, a new estate agent valuation could see a higher asking price now.
Repurposing for home-working
A growing number of people in the UK were already working from home at least partly before this year. However, since lockdown, this figure has increased exponentially, and it could even be a permanent change for many. According to the Office for National Statistics, 47% of people were working from home in April.
Interestingly, two fifths of people across the country adapted their homes to enable this change. Some set up dedicated spaces for working, teaching and even gyms, as people’s primary uses for their homes became more diverse.
More than a quarter (28%) of people have either created a workspace in another room, or adapted a room to enable home-working, says Aviva. For 5% of people, a building or space outside the home has been adapted to enable home-working.
Aviva adds: “While many of these arrangements may have been intended as a short-term measure originally, a recent study found that almost half of workers (45%) expect to work flexibly after lockdown ends.”
“[A further] 81% plan to work remotely at least one day per week – suggesting some rooms and outbuildings could be altered permanently.”