House price sentiment in the UK has bounced back with households across the country believing that prices increased in August, according to the latest index to be published.
Households in London perceived the biggest price growth in September, followed by the South East and East of England but respondents in all 11 regions were positive, the House Price Sentiment Index from Knight Frank and HIS Markit shows.
The future HPSI also picked up again in September with households in all regions confident that the value of their home will rise over the next 12 months with those in the south more confident than the north.
It is the second consecutive monthly rise in house price sentiment following the result of the European Union referendum in June. Some 20.8% of the 1,500 households surveyed across the UK said that the value of their home had risen over the last month, while 6.9% said that prices had fallen.
This resulted in a HPSI reading of 56.9. 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.
September’s reading was an increase from the 51.4 recorded in August, and was the largest month on month increase in the index in seven years. However, in spite of the jump, the index remains below the average HPSI reading for the first six months of the year, prior to the EU referendum of 59.9 and significantly lower than the peak of 63.2 recorded in May 2014.
Households in all 11 of the regions covered by the index perceived that the value of their property rose in September, with Londoners at 63 reporting the biggest rise. They were followed by those in the South East at 60.4 and the East of England at 59.9.
The future HPSI, which measures what households think will happen to the value of their property over the next year, also rose in September to 64.7 from 58.3 in August. However, similarly to the headline index, while future sentiment has risen notably month on month and is comfortably above its recent post EU referendum low of 51.3 in July, it remains lower than seen during the three years prior to the vote.
While households are still positive, they are expecting more modest growth in property prices over the next 12 months than they were earlier in the year. As well as regional variations in future house price sentiment, there are also noticeable differences depending on tenure.
Mortgage holders at 69.9 and those who own their home outright at 67.7 expect the biggest price growth, while those living in the private rental sector expect more subdued growth at 62.2.
The index also shows that some 5.8% of households are planning to buy a property in the next year, a slight fall on the 6.5% who said the same thing in June. Londoners are the most likely to move in the short term, with 8.9% of households looking to purchase a property in the coming 12 months.
‘House price sentiment is mirroring the broader pick up in confidence after Brexit. This comes as initial data shows a continuing positive picture for both employment and economic output. The housing market is now entering the typically busier autumn season, with indications that activity is rising, especially in key urban areas,’ said Gráinne Gilmore, head of UK residential research at Knight Frank.
‘There is still uncertainty surrounding the next steps of how the UK will move to exit the European Union, and this could create some economic turbulence. Yet the fundamentals of the housing market remain unchanged, underpinned by limited supply and ultra-low mortgage rates,’ she added.
According to Tim Moore, senior economist at IHS Markit, September’s data highlights a sustained recovery in house price sentiment from the three and a half year low seen just after the EU referendum.
‘In each of the past two months, UK households’ views have become more upbeat in terms of both current property values and expected prices for the year ahead. There are early signs of a V-shaped recovery in house price sentiment across all UK regions monitored by the survey,’ he explained.
‘However, looking through the summer volatility, house price sentiment remains weaker than seen on average in the first half of the year, and well below the peaks seen during spring of 2014. As a result, recent survey data indicates that Brexit uncertainty has temporarily dented but not derailed housing market confidence. Moreover, the prospect of low interest rates for longer and an entrenched shortage of housing supply are key factors supporting UK property values,’ he added.
