News: UK house price optimism hits highest level since 2010

Tue, 19 Feb 13

Optimism over house prices in the UK has hit the highest level since 2010, according to Knight Frank. The firmís latest House Price Sentiment Index shows that households in all 11 monitored UK regions expect that the value of their home will rise over the next 12 months - the first time that all regions expect price growth for more than two and a half years.

The positive outlook arrives despite the fact that households perceived the value of their homes dropped in February. Some 8.5% of the 1,500 homeowners across surveyed across the UK said that the value of their home had risen over the last month, while 11.7% said the value of their home had fallen. The result index rating of 48.4 is up from 47.6 in January and marks the highest reading in 31 months.

Residents may have good reason for the optimism, adds Knight Frank, noting that the pace of decline was the slowest since June 2010.

Londoners (64.2) lead the way in expecting prices to rise, closely followed by those in the South East (62.2) and, perhaps more surprisingly, Wales (60.5). This marks the first month that households in Wales have reported that they are expecting property values to rise since July last year.

Households in Scotland and the North East are also expecting prices to rise for the first time in three months.

The extent of the price rises expected however still shows a north-south divide, with households in the southern regions more optimistic about prices rises than those in the north.

There was also a large jump in optimism about house price rises among those who own a home with a mortgage. The reading for this group rose from 56.0 in January to 62.3 this month, the highest reading since June 2010.

Likewise those aged between 35 and 44 are also more upbeat about possible house price rises over the next 12 months than at any time since June 2010.

Grainne Gilmore, head of UK residential research at Knight Frank, said: 'The optimism over house prices seen at the start of the year has strengthened sharply this month, with households now more upbeat about the outlook for house prices than at any time since June 2010.

'Households in every region expect prices to rise, reflecting a real change in outlook across the country.

'The data suggests that households have brushed off the rather gloomy economic news, and instead have been buoyed by positive signals emanating from the mortgage market in recent weeks, with lending rates falling sharply and lending to new buyers picking up.

'Indeed the HPSI readings show that mortgage borrowers are among those who are most optimistic about house prices.

'Likewise, the outlook of those aged between 35 and 44 has becoming much more positive, and it is these buyers, who will typically be buying their first or second property, who are set to benefit from the looser mortgage lending conditions.

'There are hopes that the Bank of Englandís Funding for Lending scheme will further boost lending this year, and signals from the new Bank of England Governor that the base rate may be kept on hold for a prolonged period will only help those trying to climb onto the property ladder.'

Chris Williamson, chief economist at Markit, said:

'House price optimism has perked up to its highest level in over two and a half years in February, providing encouraging evidence that the property market has seen a strong start to the year.

'The improvement in sentiment about current and future house prices provides firm evidence that the Funding for Lending Scheme is already having a noticeable beneficial impact on the market, via the improved availability of mortgages and the simple fact that people perceive that the new initiative will drive a recovery of the housing market.

'With rising housing market sentiment adding to the news from the PMI surveys of a return to growth of business activity in January, the picture for the UK economy has brightened considerably since late last year.'

See also: House Prices

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