City’s ‘hidden equity’ as half of Edinburgh homeowners undervalue their homes by more than £28,000

New analysis by online property portal Zoopla, has found that homeowners in Edinburgh are undervaluing their homes by an average of £28,351.

Monday, 3rd May 2021, 4:40 pm
Two thirds of homeowners across Edinburgh have lost touch with the value of their home.

The Hidden Equity Survey of 2000 homeowners who have had their home valued by an estate agent in the past three years, establishes for the first time how accurate the estimations of the value of their homes really are. It found that just one in three (33%) Edinburgh homeowners have an accurate idea of the estimated value of their home, with almost half (45%) saying it was worth more than they thought it was.

When asked for their thoughts on why their homes were worth more than expected, two fifths (43%) attributed their good financial fortune to installing a new bathroom. Other popular reasons included redecorating (41%) and work on the garden (32%).

The practicalities of improving a property aren’t the only reasons though. Edinburgh becoming an increasingly desirable place to live has also helped to add value to properties, with a third (36%) of homeowners citing desirability of the city for homes being worth more than their owners expected.

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More than half of homeowners in Edinburgh unlocked their ‘hidden equity’ to move to a nicer property. Pic: Donald MacLeod.

For Edinburgh homeowners who went on to sell their home and benefit from their hidden equity, the financial boost had a significant impact, with the majority (84%) saying the additional money ‘improved their lifestyle’. More than half (59%) said they were able to move into a better property than they expected as a result (for example, it had more bedrooms, was in a nicer area, had a garden etc.).

One in ten (12%) used their extra cash to go on more holidays and a further one in ten (12%) gifted the money to their children to help their future plans.

For Edinburgh homeowners who did not know the true value of their home until they got it valued, one in three (34%) said they would have made different financial decisions in the years prior if they had been aware of their hidden equity.

On the flip side, of property owners whose home was worth less than they expected, two fifths (43%) said they would have paid off more of their mortgage, almost a third (29%) would have worked harder to build their savings rather than assume their home was accruing equity that they could draw on at a later date, and one in ten (14%) said they’d have spent less on non-essential purchases like jewellery, watches or expensive presents.

House prices rising

Zoopla has also revealed the latest House Price Index, which studies multiple local housing trends and prices on an annual basis. The data shows that the average house price in Edinburgh is now £241,000, with prices rising by 2.8% in the last 12 months. The data also shows prices in Edinburgh have increased cumulatively by 24.4% in the past five years.

Gráinne Gilmore, head of research at Zoopla, said: "The direction of house prices has long been a staple of conversation around dinner tables across Edinburgh and many homeowners could be in for a lovely surprise if they have their property valued, according to our research.

“Because of the impact of the pandemic, many households are re-evaluating how they want to live and this has had an impact on the local housing market. Buyer demand has soared, racing ahead of supply, putting upwards pressure on prices. House price growth in Edinburgh is currently at 2.8% annually."

As a first step to staying on top of a property’s value, homeowners can check My Home on Zoopla.co.uk, where they can discover their home’s worth with an instant online estimate based on powerful market data. They can also keep track of their house price estimate and access a timeline of their home’s sales history.

My Home also allows homeowners to track the estimated value of other homes in their neighbourhood, as well as homes they might want to buy in the future. Zoopla is encouraging homeowners to get estate agent valuations of their home – the most accurate way to value a property – to see if they are sitting on more equity than they think.