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UK home owners confident about prices rises in 2016, latest sentiment index shoes

People in London perceived the strongest rate of price growth over the course of the month, while households in the North West reported the most modest rate of growth, the data from the House Price Sentiment Index from Knight Frank and Markit Economics.

The strongest growth expectation was in the East of England but the rate of growth expected over the next year eased in six of the 11 regions in January.

The figures shows that 20.9% of the 1,500 households surveyed across the UK said that the value of their home had risen over the last month, while 3.6% said that prices had fallen. This resulted in a HPSI reading of 58.7.

This is the thirty fourth consecutive month that the reading has been above 50. 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.

January’s reading was a slight decrease from the 59.4 recorded in December, but returns the index to the same level as seen in November. It is just slightly higher the average reading of 58.5 recorded throughout 2015, but remains below the peak of 63.2 in May 2014, reflecting the easing in average UK house price growth seen since then.

Households in all of the 11 regions covered by the index reported that prices rose in January, led by households in London at 68.1 and the South East at 64.3, although in both cases these sentiment index readings were slightly lower than in December. The current sentiment index was lowest for the North West at 51.3 and the East Midlands at 52.3, indicating that households in these regions perceived the most modest rise in prices across the UK in January.

The future HPSI, which measures what households think will happen to the value of their property over the next year, rose slightly in January to 70.5 from December’s 70.3. This is the highest reading since June 2015, but remains below the peak of 75.1 reached in May 2014.

Households in the East of England chalked up a record high reading for future house prices expectations at 81.1, indicating they anticipate the largest increase in the value of their home over the next 12 months.

Londoners at 79.1 continue to expect strong growth in prices over the next year, with the highest reading for the region since May 2014. Meanwhile, there was a notable drop in the future reading for the North West, down from 67.5 to 62.3 in January, as well as Scotland, which fell to 61.8, down from 65.8 in December, and an average reading of 65.1 throughout 2015.

Mortgage borrowers are the most confident that prices will rise over the next year at 76, followed by those who own their home outright at 73.1.

‘Households expect house prices to rise again in 2016. The future sentiment index is now sitting just above where it was in January 2015, and we now know that UK house prices climbed by 4.5% during the course of the year,’ said Gráinne Gilmore, head of UK residential research at Knight Frank.

‘The latest house price sentiment index suggests that monetary and political housing policies have not had a dramatic impact on households’ assessment and outlook for the value of their property,’ she pointed out.

‘Mortgage borrowers are the most positive about the outlook for house prices over the next year, perhaps reflecting the anticipation of a longer period of ultra-low rates after the Bank of England’s decision to hold rates this month, and signals from rate-setters that the UK base rate could be at 0.5% for some time yet,’ she added.

Tim Moore, senior economist at Markit, explained that overall UK house price sentiment was little-changed overall at the start of 2016, with households across all regions continuing to anticipate rising property values over the course of the year.

‘Historically, this index has been quick to signal upcoming changes in property market conditions. As a result, January’s strong survey figures suggest that UK house price sentiment has so far been resilient in the face of recent global financial market jitters and a more gloomy economic news flow,’ he said.

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