Almost half of UK homeowners are undervaluing their home, with their properties worth nearly £50,000 more than they realised.
Only three out of 10 people have an accurate idea of how much their home is worth, with 45% undervaluing and a quarter overvaluing their property, according to our inaugural Hidden Equity Survey.
Those who underestimated the value of their home discovered it was worth £46,305 more than they thought, which equates to roughly 1.5 times the average UK salary. Meanwhile, those who overvalued it were out by around £44,313.
At a national level, this means that more than one million UK properties could be carrying six figures of hidden equity – unbeknown to their owners.
When all the survey results were taken into account, the net result was that the average home is worth £9,470 more than its owner realised, meaning UK homeowners are collectively sitting on a staggering £237bn of hidden equity.
What is the picture like in London?
Some 35% of London homeowners found their property to be worth more than they expected, by an average of £117,000.
Conversely, a similar amount – 37% – said their home was worth less than they thought, by an average of £49,000. Meanwhile, 28% of homeowners said the value was in line with what they expected.
When all the survey results were taken into consideration, the average home in the capital is worth £22,846 more than its owner anticipated. To put this into context, that’s more than double the £9,470 national average.
What impact did hidden equity have on homeowners?
The research, which was based on homeowners who had their home valued via an estate agent in the past three years, highlights the significant gap between how much people think their home is worth and what it really is.
Nearly a third of people whose home was worth more than they realised said they were overjoyed, while 6% described it as feeling like they had won the lottery.
Among those who went on to sell their home and benefit from the hidden equity, the unexpected windfall had a significant impact, with 81% saying the additional money had enabled them to improve their lifestyle.
Exactly half said they were able to move to a better property than they had expected, such as one with more bedrooms or in a nicer area, while 18% of those aged 55 to 64 said they could retire earlier. For those able to retire earlier than expected, it was on average by more than three years.
Around 13% said it had enabled them to upgrade their car, with the same proportion going on more holidays and 8% using the money to help their children get onto the property ladder.
For the seven in 10 homeowners who did not know the true value of their home until they got it valued by an estate agent, 45% said they would have made different financial decisions in previous years if they had been aware of their hidden equity.
Nearly half of those again – 21% of respondents – said they would have made ‘significantly’ different decisions.
Some 31% of homeowners whose home was worth less than they expected said they would have worked harder to build up their savings if they had known the true value of their property, while 12% said they would have put more money into their pension. Others said they would have spent less on holidays, cars and luxury items.
What could this research mean for you?
Our survey and map, below, show that many homeowners may be in for a nice surprise if they check the current value of their home.
There are significant benefits to knowing exactly how much your home is worth, particularly if you are thinking of selling it, as its value could impact the type of property or location you look to move to.
The supply of homes for sale is tight, so if you list your home now it will not only stand out, but you will also be in a good position to take advantage of the stamp duty holiday on your next step on the housing ladder.
Gráinne Gilmore, head of research at Zoopla, explained: "The effects of the pandemic over the last 12 months have been felt in the housing market, with many households reassessing how and where they want to live.
"There is soaring buyer demand but this is not currently being matched by homes being listed for sale. Homeowners considering a move could be in pole position in their local market if they offer their property for sale, and could be set to unlock hidden equity."
How can you find out if you've got hidden equity in your home?
As a first step, check out My Home on Zoopla to get an instant online estimate of your property’s value based on our extensive market data.
You can use it to access a timeline of your home's sales history and see what properties sold for in your area too.
My Home also enables you to track the estimated value of other properties in your neighbourhood, as well as the value of homes you may want to buy in future.
Whether you’re ready to sell or just plain curious, speak with local estate agents using My Home to get an expert market valuation and personalised guidance on how to best navigate this busy housing market.
And register with Zoopla to plan your next move. You can set up instant email alerts for homes that match what you’re looking for – and save and access your favourites all in one place.
Top three takeaways
- More than half of homeowners undervalue their home, with their properties worth nearly £50,000 more than they realise
- Only three out of 10 people have an accurate idea of how much their home is worth, with 45% undervaluing and a quarter overvaluing their property
- Nearly one in 10 homeowners found their home was worth more than £100,000 more than they thought, with 40% of these properties located in London and the south east