Home owners across the UK believe that the value of their home rose over the last month and also think they will keep rising in 2017, the latest sentiment index shows.
It is the fifth month in a row that the house price sentiment index from Knight Frank and IHA Markit has been in positive territory following the post European Union referendum low in July.
Some 17.6% of the 1,500 households surveyed across the UK said that the value of their home had risen over the last month, while 5.3% said that prices had fallen.
The proportion of households reporting no change in prices, meanwhile, was at its highest level in nearly two years. This resulted in a HPSI reading of 56.1. 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.
While December’s reading was a slight increase from the 55.3 recorded in November, it remains significantly below its peak of 63.2 recorded in May 2014. It is also lower than the reading of 59.4 recorded in December 2015, reflecting the easing in house price growth seen since then.
However, households in all 11 of the regions covered by the index perceived that the value of their property rose in December, only the second time that this has happened since the EU referendum in June.
Households in the East of England at 61.9 reported the biggest rise over the course of the month, followed by those in London at 60.8 and the South East at 58.9.
The future HPSI, which measures what households think will happen to the value of their property over the next year, dropped slightly in December to 62.3, down from 64.6 in November. Knight Frank forecasts for the UK property market, released last month, also point to an easing of price growth in 2017.
However, there remain quite large regional variations in terms of household expectations, with Londoners at 69 the most confident that prices will continue to rise. Households in Scotland are expecting the smallest gains at 54.1 and house price expectations eased in December compared with the previous month in nine of the 11 regions covered by the index.
The research also shows that 5.2% of households plan to purchase a new property within the next 12 months, down from 6% in October. But while the number of households planning to purchase in the short term has fallen, there was an increase in the number taking a medium term view on purchases, with 13% planning to buy within two to five years’ time, up from 11.5% in October.
‘Households expect the value of their home to rise over the next 12 months, but at different rates across the regions, reflecting the multi-speed nature of the market in geographical terms,’ said Gráinne Gilmore, head of UK residential research at Knight Frank.
‘However, the pattern of expectations across age groups has changed since the vote to leave the EU, indicating that the level of uncertainty is causing a coalescence of opinion on future price growth,’ she explained.
‘Overall the reading is for price growth, the typical trend over the last few years has been for the index to show that those aged over 55 expect larger increases in the value of their home than those aged between 25 and 34, reflecting the higher levels of home ownership among older people. This gap was reversed for three months after the vote,’ she pointed out.
‘While those aged over 55 are now once again predicting stronger price growth than those aged 25 to 34, the gap between the two groups in November and December has shrunk to the smallest margin since late 2014, marking a more even spread of expectations around house price regardless of age or tenure,’ she added.
According to Tim Moore, senior economist at IHS Markit, pointed out that while house price sentiment rebounded swiftly from its low point after the EU referendum, confidence has now settled in at its lowest range for three and a half years.
‘This pattern has been seen across all UK regions, likely reflecting heightened economic uncertainty and a more subdued near term outlook for household finances. At the same time, headwinds to house price momentum have been counterbalanced by ultra-low mortgage rates, entrenched supply constraints and resilient consumer confidence,’ he said.
‘Looking ahead, UK households expect an increase in their property value over the course of 2017, with those living in London and the South East the most likely to anticipate a rise. However, year ahead forecasts moderated in December and the proportion of UK households expecting no-change in house prices reached its highest since January 2013 at 54%,’ he added.
