Lloyds Banking Group report wealth increases by over £86,000 per household in the past decade

Total household wealth in the UK has increased by £2.36 trillion (55%) in the past decade, according to latest research by Lloyds TSB Private Banking. Total household wealth at the end of 2011 is estimated at £6.6 trillion, up from £4.3 trillion in 2001.

The increase of £2.36 trillion in household wealth is equivalent to £86,342 per household since 2001. The value of household wealth has grown at a faster rate than the overall increase in consumer prices, with the retail price index up by 38% over the past ten years, as well as gross household disposable income, which grew by 44%.

Housing's share of wealth has increased…
Bricks and mortar as a percentage of household wealth increased from 36% in 2001 to 40% in 2011. Over the period, the value of housing wealth increased at one and three quarter times the rate of financial wealth; 73% against 45%.

…due to the significant rise in the value of the housing stock…

The increase in housing wealth was driven by the £1.8 trillion rise in the value of the nation's private housing stock from £2.1 trillion in 2001 to £3.9 trillion in 2011. Increases in both average house prices and the number of privately owned homes (which grew from 20.1 million in 2001 to 22.4 million in 2011) have been the drivers behind the surge in the value of housing.

…which has outpaced the rise in mortgage debt
Whilst the value of housing stock has soared during the past decade, the total value of mortgage debt more than doubled (111%) from £591 billion in 2001 to £1.25 trillion in 2011. The £1.8 trillion increase in the value of housing assets, however, comfortably outstripped the £655 billion rise in mortgage debt between 2001 and 2011. As a result, housing wealth – the value of housing assets less the total value of outstanding mortgage balances – increased by £1.1 trillion from £1.5 trillion in 2001 to £2.6 trillion in 2011.

Financial assets have also played their part…
The majority of household wealth continues to be held in the form of financial rather than housing assets. The total value of financial assets (such as bank and building society deposits, government The LTSB Private Banking measure of household wealth includes the value of residential buildings and financial assets held by UK households. The amount of outstanding household debt has been deducted to calculate net wealth. Data is from the Office of National Statistics, Communities and Local Government and Lloyds TSB.bonds, shares in companies, life assurance and pensions) held by households has increased by £1.2 trillion in the past ten years from £2.9 trillion in 2001 to £4.1 trillion in 2011.

A significant driver was the £718 billion rise in the equity held by households in life assurance and pension fund reserves. There was also a doubling – an increase of £549 billion – in deposits held with financial institutions and National Savings. Overall, the rise in the value of financial assets owned by households was primarily driven by increased investment. There was a relatively modest boost from stock market performance with the FTSE All Share Index increasing by just 13% in the decade to 2011.
Only a £6 billion decline in household since 2007….
The downturn in economic activity since 2007 has seen household wealth decline; but by just £6 billion over the past four years. This was driven mainly by lower house prices

… with less than 3% decline in 2011
There was a 2.6% fall in household wealth between 2010 and 2011; this was a result of declines in both housing wealth (‐4%) and financial assets (‐ 1%). Within financial assets, the largest decline was in the value of shares and other equity held by households which fell by 10% (£65 billion).

Suren Thiru, economist at Lloyds TSB Private Banking, commented:"The substantial growth in household wealth over the past decade is partly the result of the increase in the value of the housing stock between 2001 and 2007. Whilst financial assets have played their part, the value of housing stock grew at a significantly faster rate. Rising housing wealth has benefited those who own their own homes and those who rent out properties in the private sector.

"Whilst the financial position of UK households has weakened a little since 2007 as a result of deteriorating economic activity and lower house prices, overall their financial position is a lot stronger than a decade ago."