UK house price sentiment moderates slightly ahead of Election

Some 17.7% of the 1,500 households surveyed across the UK said that the value of their home had risen over the last month, while 6.5% said that prices had fallen. This resulted in a HPSI reading of 55.6, slightly below the reading of 57.4 in April and the lowest reading so far this year.

While still positive, house price sentiment remains below its peak of 63.2 reached in May 2014.

Households in Wales (59.5) reported the biggest rise over the course of the month, only the second time this has been the case since the inception of the index back in 2009.

Households in the South East (59.1) and East of England (58.8) reported the next largest rises. Interestingly, the largest month-on-month change occurred in London where the index fell to 54.6 in May from 60.7 in April.

Outlook

The future HPSI, which measures what households think will happen to the value of their property over the next year, fell to 64.5 in May, down from 67.1 in April.

As with the current HPSI readings, there are quite large regional variations in the data, led by households in the South East (70.8) and London (70.7).

Oliver Knight, an Associate in Knight Frank’s Residential Research team, said: “May’s survey shows a moderation in both current and future house price sentiment compared with the previous month. Households still report that values are increasing, but at a more modest pace than before the EU Referendum, which is consistent with wider housing market trends.

“The recent softening in sentiment in the immediate run up to the General Election in June may be a reaction to the slight uncertainty that inevitably comes with the vote, combined with wider inflationary pressures as well as affordability concerns in parts of the country. Yet at the same time, a lack of supply of housing for sale is underpinning pricing across much of the UK.”

Tim Moore, senior economist at IHS Markit, said: “UK house price sentiment remains subdued in comparison to the trend recorded since the recovery began in early-2013. The balance of households suggesting a rise in their property value was the lowest for six-months during May, with the greatest loss of momentum recorded in London. In fact, current house price sentiment in the capital dropped below the UK-wide figure for the first time since December 2009.

“The latest survey data revealed that UK households continue to anticipate rising house prices over the next 12 months, but the level of confidence moderated to the weakest seen so far in 2017.

“Among those living in the South of England, expectations of house price gains were far more widespread than elsewhere across the UK. This adds to evidence that stretched supply is likely to sustain pricing over the next 12 months, despite localised affordability constraints and a renewed squeeze on real incomes.”