One in four think UK house prices will rise by at least 5% in next year

One on four people expect house prices to increase by at least 5% in the next 12 month as confidence in the UK’s housing market rises. Indeed confidence in the housing market has risen significantly over the past three months, according to the latest quarterly Halifax Housing Market Confidence tracker.

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The tracker reveals that the headline House Price Outlook balance, that is the difference between the proportion of people across Britain that expect the average house price to rise rather than fall, stood at +40 in June.

This was an increase of seven percentage points compared with last quarter and was the highest score on this measure since the tracker began in April 2011.

‘Sentiment regarding the outlook for house prices has improved markedly over the past quarter, continuing the trend seen since late 2012. This increase in optimism is partly due tohouse prices being stronger than expected in the first half of the year.

We continue to see a clear north/south divide with significantly higher proportions of people expecting prices to rise in the south than elsewhere in the UK,’ said Martin Ellis, housing economist at the Halifax.

‘Nonetheless, the market still faces substantial headwinds with, for example, house prices remaining above the historical average in relation to earnings. Such factors are likely to prevent a sharp acceleration in house prices,’ he added.

More than half, 52%, of British adults predict the average UK house price will rise over the next year, an increase of 7% since March and 25% since June 2012. Londoners are the most optimistic with 73% expecting a rise. Those living in the North West are the least optimistic with 35% of respondents predicting that the average price will rise.

Some 50% of Londoners expect house prices to rise by 5% or more over the next 12months and this is double the UK average of 24%. This is a substantial increase from 20% in the first quarter of 2013 and 18% up on a year ago.

Ellis said that the various initiatives designed to stimulate the market such as the funding for lending scheme, New Buy and Help to Buy equity share schemes appear to be working which he described as encouraging.

Despite this, there has been little change in buying sentiment. There has, however been a marked improvement in sentiment towards selling although the net balance remains against selling. A significantly higher proportion think that it will be a good time for people to buy. Some 57% believe that it will be a good time to buy in the next 12 months with 30% thinking it will not.

Just under a quarter, 23%, believe that it will be a good time to both buy and sell over the coming 12 months. This compares with 16% three months’ ago.

The research found that worries over job security and raising a deposit remain the key obstacles to buying. Mentions about being able to afford a deposit increased significantly over the past quarter with 64% of respondents highlighting this as one of the main barriers to buying a home compared with 67% in the first quarter of 2013 The proportion identifying concerns about job security has stayed unchanged at 58%.

Prices are expected to rise in all regions, but there is a clear north/south divide. Overall more people expect the average house price to rise than fall over the next 12 months in all regions. Whilst all regions have become more optimistic since the last survey, those living in London are the most optimistic with an overall net balance of +69, followed by the South
East at +52 and the East of England at +49. In contrast, those living in the North West at +23, the East Midlands at +25, Wales at +25 and Yorkshire and Humberside at +26, are the least optimistic.

There are also regional variations in sentiment regarding buying. The highest proportion of people thinking that it will be a good time for people to buy is in Wales where 66% said it is, followed by the South East and East of England both at 63%. London has the lowest proportion with 47% of respondents feeling that it will be a good time to buy over the next 12 months, just below the West Midlands at 49%.

There are wider regional variations in sentiment towards selling. At 41% London has the highest proportion of respondents who think that it will be a good time to sell during the coming year. In contrast, only 9% in Scotland believe that it will be a good time to sell.

Men are a little more optimistic than women about house price prospects. Some 54% of men predict that house prices nationally will increase in the next 12 months compared with 49% of women.

Also some 68% of respondents predict that the cost of private sector renting will increase over the next year, continuing a steady upward trend since June 2012 when it was 61%.