The future House Price Sentiment Index from Knight Frank and Markit Economics, which measures what households think will happen to the value of their property over the next year, jumped to a new high of 72.3 in January.
This is up from 70.5 in December, and past the previous record high of 71.1 set in October 2013. It shows that more than a half of respondents said they expected the value of their home to rise in 2014, with only 6.4% anticipating a decline.
Looking at the current HPSI, households perceived that the value of their home rose in January, the tenth consecutive month that households reported a rise in the value of their property. January’s reading is slightly lower than December’s record high of 59.4. A more detailed look at the regional breakdown indicates that households throughout the UK perceive that the value of their home is on the rise.
Households in London at 69.2 and the East of England at 64.6 reported the largest rise in prices in January, while those in the North West at 53.7 indicated that their homes had experienced the most modest increase in values.
Overall some 22.5% of the 1,500 home owners surveyed across the UK said that the value of their home had risen over the last month, up from 7.7% in January last year. Only 5.1% of households said the value of their home had fallen over the last month, giving a HPSI reading of 58.7. Any figure under 50 indicates that prices are falling, and the lower the figure, the steeper the decline. Any figure over 50 indicates that prices are rising.
Households in every region expect the value of their home to rise over the next 12 months, with expectations rising to a record high in South East at 77.9, the East of England at 76.6, the East Midlands at 73 and the North East at 71.7. Londoners at 79 still expect stronger price growth than other areas of the country.
‘UK house price expectations rose to their highest level for at least five years in January as the favourable mortgage climate, improving labour market conditions and upgrades to the economic outlook bolstered the consensus view that property values will continue to climb over the course of 2014,’ said Tim Moore, senior economist at Markit.
‘There are now eight UK households forecasting prices to rise over the year ahead for every one household that expects a reduction in their property value. While households in the capital continue to indicate the fastest rises in current property values, the latest survey signals that other regions are rapidly catching up with London in terms of expected price rises,’ he explained.
Households in the Midlands and North East recorded the steepest jumps in price expectations since last month, helping bring down the difference between Londoners’ house price forecasts and those of the rest of the UK to one of the lowest seen since late 2011,’ he added.
Gráinne Gilmore, head of UK residential research at Knight Frank, pointed out that the expectation that house prices are set to rise is widespread across the UK. ‘The improving economic picture, coupled with the Government’s Help to Buy scheme which is helping to boost activity levels in the market, is bolstering expectations of capital growth,’ she said.
‘Those who have built up most equity in their home expect prices to rise most strongly, with those aged over 55 tipping the biggest price rises over the next year. However mortgage borrowers expect slightly bigger house price rises than those who own their home outright,’ she added.
