A recent survey conducted by Knight Frank and Markit Economics indicates people in the United Kingdom (UK) feel positive about the potential for home price gains despite being in the 21st consecutive month of declining prices. The House Price Sentiment Index (HPSI) rates the responses from 1,500 households regarding their feelings about their home values for the next 12 months, and the latest HPSI shows homeowners, renters and people living at home rent-free have a positive outlook about the market. This HPSI rating is the highest it has been for the last two years, although favorable responses are skewed toward those living in London where homes are better retaining value. For more on this continue reading the following article from Property Wire.
UK house prices fell for the 21st consecutive month in March but people are more upbeat about the outlook, according to the latest House Price Sentiment Index (HPSI) from Knight Frank and Markit Economics.
The house price index, which is based on a nationwide survey of 1,500 households, showed that London was the only region where households felt that the value of their property was higher this month than last.
But the survey, which also asks households about what they think will happen to the value of their home over the next 12 months, gave the most upbeat reading for future house prices in nearly two years, perhaps reflecting the recent slightly more positive
news from the economy.
The future house price index climbed to 54.3 in March, up from 50.2 in February. Any figure under 50 indicates that prices will fall, and the lower the figure, the steeper the decline. Any figure over 50 indicates that prices will rise.
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Households in six of the 11 regions expect the value of their homes to rise over the next year. In London 65.2 expect the strongest rises, 56.2 in the East of England, 60.2 in the South East and 58.1 in the South West.
Sentiment about future house prices has also risen sharply in Wales, up to 55.1 and up to 56.3 in Scotland. But households in the Midlands and the north of England are more downbeat, with 43.6 of those in the North East expecting the biggest falls in the value of their home over the next 12 months.
Those working in the private sector (56.1) are much more upbeat about the prospect of house prices rises over the next year than those working in the public sector (51.4), although this is the first time that the index for public sector workers has risen above 50 in six months.
There was a sharp bounce back in the outlook for house prices among those who work in the financial and business services sector. They expect the biggest house rises over the next year, with a reading of 65.9, up from a record low of 43.1 in January.
Those working in the construction sector (60.2) are also expecting prices to rise appreciably over the next 12 months. Those working in the retail sector (44.2) are the least optimistic about house price movements, expecting bigger falls in the next 12 months than in February, when the reading was 49.7.
Both home owners and those living in the rental sector as well as those living rent free at home, expect prices to rise over the next year. Those who have a mortgage on their home expect the biggest rise (55.3) followed by those who own their homes outright (54.5).
‘The overall outlook among households for property prices over the next 12 months has picked up strongly, with the highest future HPSI reading in nearly two years. This coincides with economic news hinting at some green shoots of growth, and positive mortgage lending figures, signalling at a slight loosening in the constricted mortgage market,’ said Gráinne Gilmore, head of UK residential research at Knight Frank.
‘But behind the figures, there is still evidence of the multi speed housing market. Households in the Midlands and the north of England still expect the price of their home to fall over the next year. This trend reflects that seen in the latest unemployment figures, indicating how perceptions of regional employment prospects are interlinked with confidence about the future movement in house prices,’ she explained.
‘There was a noticeable bounce back in optimism among those working in the banking and financial sectors in March, in contrast to the slump seen in January. This coincides with announcements of bank profits and bonus payments, which, in contrast to speculation in January, were healthier than expected,’ she added.
According to Chris Williamson, chief economist at Markit, the recent air of gloom hanging over the housing market appears to have lifted further in March. ‘People’s views on the likely value of their properties in 12 months’ time were the most optimistic since July 2010, with sentiment rising markedly compared with February,’ he said.
‘The brighter outlook for house prices is probably attributable to a number of factors, including the recent improved news flow on the domestic economy and the euro area debt crisis. Recent data has indicated a reduced likelihood of the UK facing a double dip recession, while the positive news on the Greek debt crisis has helped restore some confidence to the financial markets and banking system. These developments should help improve both the demand for housing and the availability of mortgages,’ he explained.
‘The upbeat mood is by no means universal, however, with optimism about prices biased heavily towards London and the South East. In contrast, pessimism remains widespread in the north of England and the Midlands, where unemployment remains high and property markets typically see less interest from overseas buyers,’ he added.
This article was republished with permission from Property Wire.