House prices sentiment in UK remains steady but with regional variation
Households across the UK generally believe that the value of their home has risen over the last month, according to the latest house price sentiment index.
March’s report from Knight Frank and IHS Markit was the eighth consecutive month that the index has been in positive territory, unchanged from February, but it does reveal fairly large regional variations.
Households in nine of the 11 regions covered by the index perceived that the value of their property rose in February and those in the South East at 64.4 reported the biggest rise over the course of the month, closely followed by Londoners at 64.
Households in the North East at 48.2 and Wales at 49.3 were the exceptions, with households reporting a slight fall in prices over the course of the month.
‘The latest survey data suggests that house price sentiment across the UK is becoming steadier. Households still report that values are increasing, but at a more modest pace than before the European Union referendum, which is consistent with wider housing market trends,’ said Oliver Knight, an associate in Knight Frank’s residential research team.
The future index, which measures what households think will happen to the value of their property over the next year, fell in March to 66.8 down from February’s post referendum high of 67.5.
A fall in expectations for house price growth in Scotland to 51 in March from 62.2 in February contributed to the slight dip in the headline future index and the report points out that uncertainty surrounding a possible second referendum on Scottish independence may have weighed on household expectations.
However, March’s reading was still the second highest achieved by the index since the UK’s referendum on EU membership.
Households in the South East remain the most confident about future price rises with a reading of 75.6 followed by those in the East of England at 72.8 and the West Midlands at 72.2.
‘Future price expectations remain in positive territory, especially in the South and Midlands, but there are a number of headwinds which could weigh on the market, including rising inflation and second-round effects from Brexit. Yet at the same time, a lack of supply of housing for sale is underpinning pricing across much of the UK,’ Knight added.
According to Tim Moore, senior economist at IHS Markit, the relatively upbeat house price sentiment in March, provides another signal that confidence has gradually picked up during the first quarter of 2017.
‘This suggests that ultra-low mortgage rates and the resilient UK labour market are helping to offset the drag on house price sentiment from squeezed consumer finances. While sentiment has rebounded strongly since last summer, house price expectations are still much more subdued than those reported in the three years leading up to the EU referendum,’ he said.
‘Looking at house price expectations for the next 12 months, regional divergences widened across the UK during March. In particular, household sentiment in Scotland fell to the weakest for over four years, and the gap relative to UK wide price expectations was the greatest since the survey began in 2009,’ he explained.
‘Meanwhile, the latest survey saw London drop into the bottom half of the UK regional table for the first time since April 2010. By contrast, people living in the West Midlands were more confident about the outlook for their property values than at any time in the past two and a half years,’ he added.