25 Aug UK households positive about property market, latest sentiment index shows
Households in all regions of the UK perceived that the value of their home rose in August, and at a faster pace than in July, according to the latest house sentiment index.
It is the first rise in the index from Knight Frank and Markit Economics in the month of August, which is typically a quieter summer period, since 2009.
The index, regarded as a bellwether for house price growth across the country, says that it reflects the upward pressure on house prices due to a lack of sock across the residential property market.
Households in all UK regions expect house prices to rise over the next 12 months, although the rate of expected increases eased in many regions including London and the South East and some 6.6% of households expect to buy a home over the next 12 months, up from 5.3% in the previous month and the joint highest since July 2014.
Some 23.6% of the 1,500 households surveyed across the UK said that the value of their home had risen over the last month, the second highest reading since October last year. Just over 4% said that prices had fallen, resulting in a HPSI reading of 59.5.
This is the twenty ninth consecutive month that the reading has been above 50. Any figure over 50 indicates that prices are rising, and the higher the figure, the steeper the increase. Any figure below 50 indicates that prices are falling.
August’s reading marked a rise from the 58.6 recorded in July, and while matching June’s reading, it remains well below the record high of 63.2 achieved in May last year.
Households in all 11 regions reported that prices rose in May, with those in the South East at 64.3 reporting the biggest rise. This is only the second time in the last four years that the perceived increase in South East prices has outstripped that in London.
In fact, the reading for London eased notably after a spike in July, dipping from 69.6 to 63.4, the second largest monthly drop since late 2010. While Londoners still perceive that prices are rising, they are reporting that the pace of increases has eased.
Tim Moore, senior economist at Markit, pointed out that UK house price sentiment has now strengthened considerably from the year and a half low reached in February. ‘While still below the high water mark reached last May, the latest survey indicates that perceptions of rising property values are more widespread than at any time seen during the five years leading up to 2014,’ he said.
‘The uptick confounds the usual seasonal summer lull and comes in spite of heightened expectations of a Bank of England rate rise next year. In particular, August’s spike in current price perceptions across the South of England suggests that an acute shortage of supply remains the major factor driving up property values,’ he explained.
‘Looking ahead, the prospect of a rate hike next year does appear to have dampened households’ views on the property price outlook, but so far only marginally,’ he added.
It is he strength of the UK economy, rising wages and an undersupply of housing stock on the market that are combining to underpin UK house prices, according to Gráinne Gilmore, head of UK residential research at Knight Frank.
‘This has resulted in the first rise in the House Price Sentiment Index in August, usually a quieter summer period, seen since 2009,’ she added.
However, she pointed out that the expectation of future interest rate rises, something about which the Bank of England rate setters are issuing more frequent warnings, is having an impact on the expectations for future house price increases. ‘While households still expect the value of their home to rise over the next 12 months, the pace of the expected rise has eased in recent months,’ she added.