The index also shows that households across the UK perceived the value of their home had risen in the past four weeks, only the second time this has happened since June 2010.
In terms of future house price movements, the surge seen in optimism over future house price rises first seen in April continued in May, with households expecting the value of their home to rise over the next 12 months.
This rise in optimism follows the government’s announcement of its multi billion injection into the mortgage market, via its Help to Buy scheme, suggesting that this has helped boost confidence in the market.
May’s overall future HPSI reading is at the second highest level since summer 2010. But the regional picture is mixed. Londoners are the most optimistic that prices will rise, while those in Wales expect only a modest rise in the value of their property.
Expectations for price rises are highest among 24 to 34 year olds, the typical age for first time buyers. This was the second highest reading since June 2010.
However, over 55s also grew more confident that the value of their home would rise over the next year, with the index for this age group hitting its highest level since May 2010.
Overall around 13.5% of the 1,500 home owners surveyed across the UK said that the value of their home had risen over the last month, the highest proportion since June 2010. Some 9% of households indicated the value had fallen, giving a HPSI reading of 52.2.
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.
May’s reading is up from 50.6 in April, and marks just the second time that the index has been in positive territory since June 2010, signalling that after three years of declining values, households are becoming more confident that the price of their property is rising.
The future HPSI, which measures what households think will happen to the value of their property over the next year, remained in positive territory for the 16th consecutive month.
The overall index reading for the UK was 61.5, down slightly from 62 in April, but still marking one of the highest readings in three years. On a smoother three month average basis, the future HPSI reading was 60.2, in the three months to May, up from 59.2 in the previous three month period.
While there are regional differences in the outlook for prices, respondents in all regions expect the value of their property to rise over the next 12 months. Londoners’ expectations have soared, with the index reading jumping from 70.8 in April to 76.3 in May. This is the highest reading on record.
The biggest drop in confidence was in Wales, where after a surge to 63.3 in April, May’s reading receded to 52.6.
Optimism continued to climb among those living in the private rented sector, with the index rising from 60.6 to 62.4 marking the highest reading since May 2010.
‘Optimism that the Government’s Help to Buy scheme will have a positive impact on house price movements remains strong this month, the index suggests, especially among first time buyers,’ said Gráinne Gilmore, head of UK residential research at Knight Frank.
‘While the headline data suggests a sea change in sentiment over the future movement of house prices across the country, the regional data still shows a more patchwork picture. Londoners are very upbeat about the possibility that the value of their home will rise strongly over the next 12 months, with a record high future sentiment index reading. Their optimism may have been boosted by recent official data showing that house prices in London have risen by more than 9% over the last year,’ she explained.
‘On the other hand, households in the North East and Wales, while expecting house prices to rise, are predicting a much more modest increase,’ she added.
According to Tim Moore, senior economist at Markit, it seems that households are coalescing behind the view that property values are starting to rise after a prolonged period of stagnation. ‘Improving mortgage conditions and a more favourable economic news flow helped underpin the latest climb in sentiment. For the time being at least, better mortgage affordability is acting to offset the underlying drag from weak UK labour market conditions,’ he pointed out.
‘The recent extension of the Funding for Lending Scheme is expected to boost secured lending to households and generate a pick-up in mortgage approvals over the months ahead. Relatively strong price expectations among first time buyers are apparent in the latest survey, which adds to the evidence that better credit conditions are gradually greasing the wheels of the property market,’ he added.
