The majority of households across the UK, led by London, believe that the value of their home rose over the last month and they are confident about the outlook for 2017, according to new research.
The perceived rate of house price growth rose month on month with respondents in 10 of 11 regions covered by the Knight Frank and IHS Markit house price sentiment index (HPSI) saying price have gone up.
The future HPSI rose in February to a new post-referendum high as households in all regions expect the value of their home to increase over the next 12 months. It was the seventh consecutive month that the index has been in positive territory.
Overall some 19.9% of the 1,500 households surveyed across the UK said that the value of their home had risen over the last month, while 4.9% said that prices had fallen. This resulted in a HPSI reading of 57.5, up from 55.8 in January.
Any figure over 50 indicates that prices are rising, and the higher the figure, the stronger the increase. Any figure below 50 indicates that prices are falling. However, while February’s reading was at its highest level since the UK voted to leave the European Union it remains comfortably below its peak of 63.2 reached in May 2014 mirroring the moderation in price growth which has been seen since then.
But there are fairly large regional variations. Households in London at 65.2 and the East of England at 62 reported the biggest rise over the course of the month. They were followed by those in the South East at 60.3 and the West Midlands at 57.6. Households in Wales reported a slight fall in prices over the course of the month to 47.9.
The future HPSI, which measures what households think will happen to the value of their property over the next year, rose in February to 67.5, up from 65.5 in January and from 62.3 in December. February’s reading was the highest achieved by the index since the referendum last June.
It is also the first indication of household sentiment since the publication of the Government’s flagship Housing White Paper and remains firmly below its peak of 75.1 achieved in May 2014.
Whilst the headline index rose month on month, there remain quite large regional variations in terms of household expectations, with those in the South East at 76.4 the most confident that prices will continue to rise followed by those in the East of England at 74.5. Households in Wales are expecting the smallest gains at 58.2.
Meanwhile, mortgage borrowers at 73.6 were the most confident that prices would rise, followed by those who own their home outright at 69.7.
‘The rise in household sentiment on house prices comes as a less cloudy picture of the UK economy starts to emerge. Earlier this month the Bank of England revised up its forecasts for GDP growth, and although the country still has to negotiate a withdrawal from the EU, the immediate economic conditions remain positive,’ said Gráinne Gilmore, head of UK residential research at Knight Frank.
‘Home buyers and home owners are also benefitting from near record low mortgage rates, although affordability is an increasingly pressing issue in some areas. It is noticeable that sentiment on the future direction of house prices has particularly picked up in the Midlands and East of England, with the index reading for February close to or stronger than the average reading in the three months before the EU vote,’ she pointed out.
‘This reflects the relative strength of price growth in these markets which are benefitting from the strong performances of urban areas and the relative price differential to properties in the South East and London,’ she added.
According to Tim Moore, senior economist at IHS Markit, the improved economic backdrop, resilient labour market and low mortgage rates are behind households gaining confidence about the outlook for their property values over the course of 2017.
‘The upward direction of travel for housing market sentiment in February has seen property price expectations recover to levels seen just ahead of the EU referendum, with this pattern apparent among households in all UK regions,’ he said.
‘Brexit related anxieties appear to have receded among buyers, but there remains a sizeable list of factors likely to keep a brake on price momentum during the year ahead. These include localised affordability constraints for first time buyers, generally subdued pay growth, and a renewed squeeze on household budgets from rising living costs,’ he added.
Source: www.propertywire.com
