Just under a quarter of homeowners (24%) now expect house prices to fall in the next 12 months. While these are still outnumbered two to one by homeowners expecting a rise (50%) over the coming year, it represents an increase from the 4% predicting falls three months ago.
As a result, the typical homeowner surveyed by Your Move forecasts prices to rise by 0.7% in the next 12 months, a decrease from predictions of a 2.8% increase in Q1 2010.
Three quarters (73%) of homeowners still believe house prices will resume their long-term rise over the next two years. However, the predicted increase has declined. Homeowners now forecast more modest price rises of 3.2% in the next two years, a drop from the prediction of 5.4% three months ago.
In the next five years, they anticipate a rise of 7.3%, down from 10.6% three months ago. These predicted rises are equivalent to increases of £7,062 and £16,110 respectively on the average house price, according to latest figures from the LSL / Acadametrics house price index.
David Newnes, Estate Agency Managing Director of LSL, owner of the national chain Your Move, comments:
“In the face of a news onslaught about faltering house prices and a stalling recovery, confidence in the housing market has taken a knock. As a result, consumers have become more cautious on the market direction and more realistic on house price inflation in the next couple of years.
"A sustained rise in the market depends fundamentally on the increased supply of credit. With little sign of that happening, homebuyers are justified not to expect blistering short-term gains.”
Although homebuyers were less optimistic about future house prices, many were unaware of how much their property’s value had increased. According to the survey, nearly nine in ten homeowners (89%) believe their property had grown in value since they bought it.
The average homeowner has owned their house for over ten and a half years and believed their property has doubled in value (+101%) in that time (Feb 2000 – Aug 2010). That would mean an increase of £100,694 over this period of time.
But for the same period the average house price has actually risen by £120,562, an increase of 120%. This means that in the past ten years, the average home is worth £19,868 MORE than the typical homeowner estimates.
David Newnes continues:
“Despite the recent slowdown – and the drop we saw from 2008 - house prices have doubled in the last ten years. And people still don’t realise how much more their properties are worth now. The average homeowner is sitting on gains of £20k more than they think.
"While we might not be looking at another mini-boom in the short-term, property has proved to be a sound long-term investment despite the upset caused by the recession.”
As a result of the recent slowdown in house prices, increased affordability of house prices has been the main draw for would-be buyers. 46% of those looking to buy cite that buying is cheaper than renting – an increase from 25% in the last quarterly survey.
Nevertheless, mortgage finance is still the main deterrent for house purchase. Of those who did not want to buy a home, 71% cited that they could not afford to save the required deposit, while 70% stated that they can’t get a mortgage.
David Newnes concludes:
“Mortgage finance has slightly eased lately, but it is still putting the brakes on potential market activity. Thousands would jump at the chance of buying their own place while prices are affordable.
"Until mortgages become achievable for more first-time buyers, we will continue to see just a fraction of would-be buyers fulfil their dream of home ownership. But lending conditions are set to be adverse for the next couple of years, and we don’t expect substantial or prolonged improvement in lending in the short-term.”
