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The UK’s residential property market is likely to see continued house price momentum in the second half of 2015 but sentiment is down from last year’s highs, the latest index shows. Households still believe the value of their homes is rising and the July House Price Sentiment Index from Knight Frank and Markit Economics has now been in positive territory for 28 months in a row. However, July’s reading of 58.6 was a slight decrease on the 59.5 recorded in June, but it was still the second highest reading so far this year, an indication that households across the UK are still confidence that house prices are rising. Tim Moore, senior economist at Markit Economics, pointed out that UK house price sentiment in July was comfortably above the year and a half lows seen during February. ‘A gradual rebound in households’ property value perceptions has been underpinned by strong demand conditions so far this summer, alongside an underlying lack of supply and the continued low mortgage rate environment,’ he explained. He believes that these factors are likely to support house price momentum through the second half of 2015, but added that tighter mortgage lending rules and stretched affordability have brought down UK households’ expectations of future house price growth from last year’s record highs. Indeed, the future HPSI, which measures what households think will happen to the value of their property over the next year, fell marginally in July to 70.2, from 70.5 in June. On a rolling three monthly basis to July the future HPSI is 70.2, the same as the previous three months, an indication that expectations for future house price growth have flat lined. ‘Overall expectations for future house price growth remain firm, underpinned by a strengthening labour market, improving economy and ultra-low mortgage rates,’ said Grainne Gilmore, head of UK residential research at Knight Frank. ‘There is now more discussion about possible interest rate rises, but this, as well as the property tax announcements in the Summer Budget, has had little impact on average expectations for the direction of travel for house prices,’ she explained. ‘However, there are regional differences in the data, with the widest spread between the future HPSI reading in the North East and London than at any time since March last year, reflecting the differing dynamics of housing markets across the country, with local economic factors leading to a disparity in the levels of house price growth,’ she added. Continue reading →
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