Homeowners expect house prices to fall for first time in 41 months
Homeowners in the UK think that the value of their home has slipped in July, the first time they have thought this for over three years, giving the first evidence of household views on property prices post-Brexit.
Knight Frank and IHS Markit’s House Price Sentiment Index (HPSI) for July shows the index has slipped below 50 for the first time since February 2013. A score under 50 indicates that households think prices are falling. Fifteen hundred households across all price bands were surveyed between 14 and 18 July.
Just 11.2% thought the value of their home had increased over the month, below the 14.6% who thought the price had dipped. This resulted in a HPSI of 48.3, a big drop from last month’s 59.7 reading and “amplified by the resilience of the index ahead of the EU vote.”
Gráinne Gilmore, head of UK residential research at Knight Frank, says: “The impact of uncertainty in the wake of the Brexit vote is clear from the HPSI index reading for July, especially in light of the relative strength of sentiment in the run-up to the vote.”
In London the sentiment reading crashed from 69.6 in June to 49.5, the first time the index has fallen below the level rate of 50 since October 2012.
Only those in the south-east and the east of England, both at 50.2, thought the value of their homes went up in the month.
The data shows that respondents in nine of the 11 regions think the value of their home fell during July, though the future HPSI is still above 50, indicating that households expect prices to rise modestly over the next 12 months, but at 50.3, this is the lowest rate since October 2012 and down from 67.7 in June.
Tim Moore, senior economist at IHS Markit, remarks: “The surge in economic uncertainty after the EU referendum weighed heavily on UK house price sentiment during July. The current prices index signalled the greatest month-to-month loss of momentum for at least seven-and-a-half years.
“Before the EU referendum, more than five times as many UK households (43%) expected a year-ahead rise in property values as those that forecast a reduction (8%). By contrast, there is now a fairly even split between individuals expecting a rise in property values (26%) and those anticipating a decline over the next 12 months (23%).”
Households in the south of England are more confident about future price rises than those in the north of England, Scotland or Wales.
The future index shows Londoners are the most confident prices will bounce back in the next year with an index of 56.3, followed by those in the south east (54.5) and east of England (53.2).
The index also shows that homeowners aged over-55 and those aged 18-24 expect prices to drop in the next 12 months but all other age ranges expect to see prices rise slightly.
“Although there has been a marked drop in the index, the readings are hovering around the ‘no-change’ mark, similar to levels in 2012/2013,” adds Gilmore.