Wealth inequality in the UK has been increasingly driven by surging property values, particularly in London and the South East, according to recent analyses and official statistics. A report highlights that property wealth has played a pivotal role in wealth disparities within London, where rising house prices combined with unequal homeownership have amplified the divide. In contrast, the South East outside London shows a somewhat more balanced distribution of property wealth, where gains from escalating house prices are more widely spread across families.

The Resolution Foundation’s research reveals the scale of wealth concentration, with the richest 10% of households holding about half of all UK household assets—a proportion that has remained stable since the 1980s. Nonetheless, the gap between the wealthiest and median earners has worsened significantly. Between 2020 and 2022, the wealthiest 10% possessed assets worth £1.3 million more than the median household, an increase from £1 million in 2006-08. This growing divide equates to over five decades of average income, up from 38 years previously.

Regional disparities also reflect this pattern of wealth inequality. The South East stands out for its higher property ownership rates and values, with about 64% of residents owning property worth a median net of £111,000, compared to only 20% of individual wealth derived from property in the North East. This is compounded by the fact that the North East has a higher proportion of renters and lower property values overall, contributing to a more even distribution of wealth there.

The wealth gap between the South East and North East has nearly doubled over the last decade, a trend largely attributed to the housing market boom in the South East, including London. Household wealth in the South East has grown by 43% since 2006, reaching an average of £503,400, while the North East lags behind at £168,500. This divergence is underscored by data showing that mean property and financial wealth grew by 150% and 50%, respectively, in London and the South East during the decade leading up to 2018, contrasting starkly with only 3% growth in the North East.

The role of housing market dynamics in exacerbating inequality is further underscored by studies indicating that the top 50% of households have seen their wealth increase much faster than the bottom half since the early 2000s. Homeownership rates are predominantly higher in the upper wealth deciles, and rising house prices have been a major contributor to this trend. By 2015-16, the top 10% owned 45% of the wealth, while the bottom half collectively owned just 11%.

Calls for wealth taxation, frequently voiced by political parties such as Labour, face scrutiny due to the complexity of wealth ownership and its demographic distribution. Senior economists warn that such measures could disproportionately affect pensioners and homeowners in the South, rather than solely the ultra-wealthy, hinting at the challenges policymakers face in addressing wealth inequality without unintended consequences.

These evolving patterns highlight the multidimensional nature of wealth inequality in the UK, where regional, generational, and asset-type disparities intertwine. They also define a critical policy dilemma: how to balance growth and stability in the housing market with the need to reduce entrenched disparities that wealth concentration fosters.

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Source: Noah Wire Services