UK household sentiment weakens as political uncertainty persists

June’s reading was the eleventh consecutive time that the index has been in positive territory. However, while this may be the case, the index has been steadily ticking down for the last three months suggesting that the perceived rate of house price growth is slowing.

Some 15.9% of the 1,500 households surveyed across the UK said that the value of their home had risen over the last month, while 9.3% said that prices had fallen. This resulted in an HPSI reading of 53.3.

Outlook for house prices

The future HPSI, which measures what households think will happen to the value of their property over the next year, fell to 61.3 in June’s survey, down from 64.5 in May.

The collection dates for this month’s HPSI were between the 7th and 12th of June, with some 15% of households responding after the result of the UK General Election was known. By looking specifically at those households surveyed after the result we are able to gauge an initial indication of sentiment, albeit one based on a reduced sample size.

On this measure, the future HPSI stood at 58.3, compared with 61.3 for the total sample. While this indicates that households still expect prices to rise over the coming 12 months, the pace of expected growth is notably lower.

Oliver Knight, an Associate in Knight Frank’s Residential Research team, said: “Heightened political uncertainty seems to have weighed on house price sentiment to some degree in June, with expectations for current and future prices slipping to the lowest level since August 2016, a time when households were still digesting the outcome of the EU Referendum.

“The General Election result, and the on-going uncertainty, suggests that any ‘election bounce’, typically seen in the month or two after a national poll, may be muted. Indeed it is noticeable that the future index only for households surveyed after the vote result announcement was slightly lower than those surveyed before the results were known – although both groups still expect prices to rise over the next 12 months. While the political backdrop may be uncertain, a shortage of housing stock available to buy, coupled with ultra-low mortgage and interest rates, is likely to put a floor under pricing across the UK.”

Tim Moore, senior economist at IHS Markit, added: “June’s survey data provides a clear signal that house price sentiment weakened at the start of this summer, with perceptions of rising property values the least widespread since August 2016. Looking through the volatility seen after the EU referendum, the latest figures suggest that house price sentiment is around the lowest for four years.

“On a regional basis, the largest falls in house price sentiment since the start of 2017 were reported by people living in the South West and London.

“UK households are also less confident that property prices will rise over the next few months. The loss of momentum reflects heightened political uncertainty, a renewed squeeze on cash available to spend and entrenched concerns about the general economic outlook. As a result, fragile sentiment among buyers appears set to limit the influence of ultra-low mortgage rates and stretched housing supply on near-term price dynamics.”

Read the full House Price Sentiment Index.