Election ‘bounce’ short-lived as house price confidence wanes

Confidence in the outlook for house price growth hit its highest level in four years following the General Election in May, but decreased again in June, the Halifax Housing Market Confidence Tracker has revealed.

House Price Optimism hit +68 in May 2015, and although it slipped back slightly in June to +64 it remains substantially higher than at the beginning of the year (+52 in the January survey measure).

The dip in confidence in June comes despite continued rise in real wage growth, together with record low numbers of homes available for sale pushing average house prices over £200,000 for the first time ever.

Nevertheless, while the May high was short-lived, the percentage of Britons predicting an increase in the averageproperty price of more than 5% over the next 12 months has still risen from 34% to 38% in the last quarter (comparing the March and June 2015 measures, respectively).

This increased optimism also corresponds with a fall in the net figure for buying sentiment from +35 in February 2015 to +25 in June 2015).

More than half (56%) of Britons said in June they think it will be  a good time to buy property over the next 12 months, compared to 61% who said this in February 2015. At the same time there’s been an increase in the net figure for selling sentiment from +27 in February 2015 to +32 in June 2015).

Interest rate expectations

With the governor of the Bank of England saying improving economic figures means an interest rate rise has moved closer, nearly half of Britons (48%) expect mortgage interest rates to be higher in 12 months’ time (compared to 45% in Q1, March 2015).

Regional optimism

Londoners are less likely than those in any other region to say it is a ‘good time to buy’ (38% of Londoners say this compared with 56% of Britons overall), making it the only region where the proportion who think the next 12 months will be a bad time to buy exceeds the proportion who think it will be a good time.

Those in the South East are more confident than in any other region that house prices will be higher in 12 months’ time (90% say this compared to 69% of Britons overall) with those in the North East and the West Midlands the least likely to say this (both 59%).

House Price Optimism  in line with Economic Optimism Index

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Martin Ellis, housing economist at Halifax, said: “Economic growth, together with increasing real earnings growth and historic low mortgage rates are all supporting the continued rise in house price optimism.

“It’s not been a smooth increase though as while there was a noticeable spike in optimism straight after the General Election result, this has now fallen off slightly.

“A key factor in maintaining optimism over house price growth has been the fact that the stock of homes available for sale is currently at record low levels. If this growth is to be sustainable then we need to see a comprehensive house building plan rolled out across the UK, and soon.”

Barriers to homeownership

Raising a deposit is still seen as one of the main barriers to homeownership (55% mention this), ahead of job security (47%) and rising property prices (35%).

While concerns over raising a deposit have fallen in the last quarter (61% of Britons cited this as a barrier to buying in Q1, March 2015), this is still higher than the proportion who said this in Q1, April 2011 (50%).

At the same time concerns about rising prices have continued to increase, with more than a third citing this as a barrier to buying (35%) compared to just 15% who said this in Q1, April 2011.

Top 10 barriers to homeownership
Q2 June 2015 Q1 March 2015 Q1 April 2011
% % %
Being able to raise enough deposit 55 61 50
Job security 47 44 52
Rising property prices/prices being too high 35 34 15
Household finances 33 37 31
The general availability of mortgages 17 19 27
Concerns about rises in interest rates 14 12 22
Shortage of property for sale where people want to live 10 9 4
Shortage of the right type of property people want to buy 9 10 5
The fees and costs related to buying a house 9 12 14
The level of stamp duty/taxation 3 2 6

Source: Ipsos MORI

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