Estimating the total tax base for UK residential land.

People are more familiar with selling prices than with rental values, so let's start with Savills' January 2015 summary to set the scene:

Their total number of units in England & Wales agrees to the total number of homes for which a Council Tax valuation exists.

We can then replace selling prices with average rents from Homelet's December 2014 survey, adjust those rents for the fact that rented homes are on average 10% smaller/cheaper than owner-occupied homes; add on 10% for Council Tax and multiply up again by the number of units, to give us the total rental value:


To arrive at the land-only rental value, all we have to do is deduct an estimated £4,000 for the annual running costs of each home (repairs, insurance, amortisation/cost of capital for bricks and mortar etc) and that's the land-only rental value of a nice round £200 billion:


We could at this stage simply say, as at January 2015, the current land-only rental value of £200 billion is 3.5% of the total value of all housing, so the land-only rental value of each home will be +/- 3.5% of its selling price, and, subject to a few caveats as explained below, this is surprisingly accurate.

Please note:

1. The headline figures for the three main house price indices (Nationwide, Halifax and HM Land Registry) of (currently £188,000; £189,000 and £177,000) are not simple mathematical averages, the first two are based on a historic hypothetical figure indexed up for price changes and HM Land Registry is based on the geometric mean rather than the simply mathematical average. To cut a long story short, their headline figures are much lower than the true average.

2. Savills' average value for England & Wales of £216,000 is one-sixth lower than a simple average of all prices paid in England & Wales reported by HM Land Registry in the calendar year 2014. If the average land-only rental value is 3.5% of Savills' lower figure then it is only 2.9% of the higher average price paid according to HM Land Registry.