News: UK homeowners optimistic despite falling house prices

Wed, 27 Jun 12

UK homeowners are optimistic about the future of their property prices in the next year, despite values falling in June.

Some 15% of households said the prices of their home declined, while 7.6% said the value of their property rose. The resulting HPSI figure is 46.3, unchanged from May, and marking the 24th consecutive month that households perceive the value of their property to have fallen.

But the outlook is upbeat for the fifth month in a row, according to Knight Frank’s House Price Sentiment Index, with eight regions expecting a rise in prices over the next 12 months.

The survey of 1,500 households across the UK showed that sentiment about current house prices was weakest in Wales (40.4) and the North East (41.9).

Only London bucked the trend, remaining the only region where residents said that prices had advanced modestly in June.

However the pace of growth was slower than in May (50.7 down from 50.9).

Gráinne Gilmore, head of UK residential research at Knight Frank, said: 'House price sentiment has now been negative for two years, but the index shows the localised nature of the market. There are wide regional variations across the UK in terms of price performance, with London leading the way, underlining the economic strength of the capital compared to many other areas of the country.

'Looking forward, the regional split is even more pronounced, with households in London, the South East and East of England expecting healthy rates of growth over the next year, in contrast to those in the North who expect price falls. But in a departure from the traditional north-south divide in the property market, residents in the South West are also preparing for house price declines.'

Chris Williamson, Chief Economist at Markit, said, ''Households are downbeat about the current value of their properties but expect values to rise over the coming year, suggesting an overall air of modest optimism continues to prevail despite the growing raft of disappointing economic headlines. However, the survey is consistent with national prices rising by a meagre 2-3%, and optimism is largely confined to the south of England, notably London.

'High unemployment, high levels of job insecurity and low pay growth are all factors likely to restrain the housing market in coming months, though further stimulus from the Bank of England, which looks increasing likely to be sanctioned when the Monetary Policy Committee next meets in July, may provide the market with a welcome shot in the arm.'

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