Home owners view of house prices at their most positive for five years, latest index shows
02-22-2014
Households in the UK perceive that the value of their home rose at the strongest rate in five years in February, according to the latest house price sentiment index from Knight Frank and Markit Economics.
Households in every region also expect the value of their home to rise over the next 12 months at the strongest rate seen since the sentiment index began in February 2009.
It is the eleventh consecutive month that households reported a rise in the value of their property and while Londoners are the most positive about the outlook for house prices, expectations across all regions are picking up.
Some 25.5% of the 1,500 home owners surveyed across the UK said that the value of their home had risen over the last month, up from 8.5% in February last year. Only 4.2% of households said the value of their home had fallen over the last month, the lowest since the index began, giving the HPSI a new record high reading of 60.7.
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.
February’s record reading surpasses the previous peak seen in December 2013 and is significantly higher than the 48.4 reading registered in February 2013.
Looking at the results on a regional basis, households in all 11 regions reported that the value of their home had risen in February, with those in London at 68.4, and the South East at 66.9 reporting the strongest growth.
The future HPSI, which measures what households think will happen to the value of their property over the next year, jumped to a new high of 74.9 this month, up from the previous record 72.3 in January. More than a half of respondents said they expected the value of their home to rise in 2014, with only 5.9% anticipating a decline.
Also, households in every region expect the value of their home to rise over the next 12 months, with expectations rising to a record high in six of the 11 regions, led by London at 81.8. Record highs were also reached in the West Midlands at 72.7, the South West at 74.4, the North West at 76.1, the South East at 78.7 and the East of England at 79.6.
Mortgage borrowers are the most confident that prices will rise over the next year at 83.1, followed by those who own their home outright at 77.4. While still positive, those who are renting are expecting more modest price rises at 60.6.
Those aged over 55 expect the biggest increase in the value of their home over the next year at 79.8, followed by those aged 35 to 44 and 44 to 54 both at 76. Those aged 18 to 24 at 67.1 are expecting more moderate price rises.
‘Households in every region of the UK have reported rising values for six months now, underlining the revival we have seen in the UK housing market in terms of activity and prices. The scale of price rises remains polarised however, with households in Wales and Yorkshire reporting much more modest price rises than those elsewhere in the UK. It is also interesting to note that households’ perceptions of price rises in the regions surrounding London are starting to catch up with those in the capital,’ said Gráinne Gilmore, head of UK residential research at Knight Frank.
‘London is also becoming less of an outlier when it comes to future house price expectations. In 2013, the average future HPSI for London was some 10 points above the average for the country, now the margin is closer to seven points. Indeed, house price expectations rose to new record highs in five other regions, including the North West and the West Midlands in February,’ she explained.
‘The recovery in the housing market reflects the increasing economic confidence in the country, which recently resulted in an upgrade to economic growth forecasts, coupled with the assurance that interest rates will remain low until next year at least,’ she added.
According to Tim Moore, senior economist at Markit, households reported the steepest rise in their property values for over five years in February, suggesting that prices have accelerated sharply even before the usual spring bounce this year. Strong house price inflation has also broadened out from London to other UK regions since the start of 2014, especially the South East of England.
‘Despite policymakers appearing increasingly vigilant about rising UK property values, the latest survey indicates no let up in price expectations at street level. February data showed that almost ten times as many UK households anticipate an increase in property values as those that forecast a decline over the year ahead,’ he pointed out.
‘On a regional basis, expectations of house price rises hit survey record highs in London and five other UK regions, with the East of England closest to matching the buoyant trend seen across the capital,’ he added.