According to the House Price Sentiment Index from Knight Frank and Markit Economics, 23.6% of the 1,500 households surveyed across the UK said that the value of their home had risen over the last month, the second highest reading since October last year. Just over 4% said that prices had fallen, resulting in a HPSI reading of 59.5. This is the twenty-ninth consecutive month that the reading has been above 50.
Any figure over 50 indicates that prices are rising, and the higher the figure, the steeper the increase. Any figure below 50 indicates that prices are falling.
August’s reading marked a rise from the 58.6 recorded in July, and while matching June’s reading, it remains well below the record high of 63.2 achieved in May last year.
Households in all eleven regions reported that prices rose in May, with those in the South East (64.3) reporting the biggest rise. This is only the second time in the last four years that the perceived increase in South East prices has outstripped that in London.
In fact, the reading for London eased notably after a spike in July, dipping from 69.6 to 63.4, the second largest monthly drop since late 2010. While Londoners still perceive that prices are rising, they are reporting that the pace of increases has eased.
While all regions reported price growth during the month, London was not the only region where the pace of increases was perceived to have slowed. The HPSI readings for Wales, the East of England and the East Midlands all declined, with a 0.1 drop in Scotland too.
The future HPSI, which measures what households think will happen to the value of their property over the next year, dipped modestly for the second month in August, to 69.5, down from 70.2 in July and 70.5 in June. This is the second lowest reading since the peak of 75.1 seen in May last year.
There are wide regional variations in evidence however. Households in the South East (77.0) and London (76.2) are the most positive about the outlook for house prices. In general however, the expectations for price rises have eased in many areas, with lower readings in August in the East and West Midlands, the North West, the East of England, London and the South East.
Some 6.6% of UK households said they planned to buy a property in the next 12 months, up from 5.3% in July and the joint-highest since July 2014.
Gráinne Gilmore, Head of UK Residential Research at Knight Frank, said:
“The strength of the UK economy, rising wages and an undersupply of housing stock on the market are combining to underpin UK house prices. This has resulted in the first rise in the House Price Sentiment Index in August, usually a quieter summer period, seen since 2009.
“However the expectation of future interest rate rises, something about which the Bank of England rate-setters are issuing more frequent warnings, is having an impact on the expectations for future house price increases. While households still expect the value of their home to rise over the next 12 months, the pace of the expected rise has eased in recent months.”
Tim Moore, senior economist at Markit, said:
“UK house price sentiment has now strengthened considerably from the year-and-a-half low reached in February. While still below the high-water mark reached last May, the latest survey indicates that perceptions of rising property values are more widespread than at any time seen during the five years leading up to 2014.
“The uptick confounds the usual seasonal summer lull and comes in spite of heightened expectations of a Bank of England rate rise next year. In particular, August’s spike in current price perceptions across the South of England suggests that an acute shortage of supply remains the major factor driving up property values. Looking ahead, the prospect of a rate hike next year does appear to have dampened households’ views on the property price outlook, but so far only marginally.”
