Brexit has had a negative impact on sentiment but many households still expect to see property prices rise at a moderate rate, according to the latest house price sentiment index (HPSI) from Knight Frank and IHS Markit.
The latest results from the HPSI show that households across the UK perceive that the value of their home dipped in July, with respondents in nine of the 11 regions covered by the index believing prices fell over the course of the month following the UK’s decision to exit the EU.
However, the future HPSI remains in positive territory, with many households forecasting that the value of their home will rise over the next 12 months, but at the most modest rate since October 2012.
Gráinne Gilmore, head of UK residential research at Knight Frank, said: “The impact of uncertainty in the wake of the Brexit vote is clear from the HPSI index reading for July, especially in light of the relative strength of sentiment in the run-up to the vote. Although there has been a marked drop in the index, the readings are hovering around the ‘no-change’ mark, similar to levels in 2012/2013.”
Households in the South of England are more confident about price rises than those in the North of England, Scotland or Wales.
As well as geographical variations, there are wide differences in expectations depending on age-groups, with those aged over-55 expecting the value of their home to dip over the next 12 months as well as those aged 18 to 24. All other age-groups expect prices to rise modestly.”
Tim Moore, senior economist at IHS Markit, said: “The surge in economic uncertainty after the EU referendum weighed heavily on UK house price sentiment during July. The current prices index signalled the greatest month to month loss of momentum for at least seven-and-a-half years. Despite a sizeable fall since June, the latest reading signalled that house price sentiment was at a level last seen in early 2013 and only marginally downbeat overall.
“Households across all UK regions also indicated a sharp recalibration of their property price expectations for the next 12 months, led by those living in London and the South East.”
Before the EU referendum, more than five times as many UK households - 43% - expected a year-ahead rise in property values as those that forecast a reduction (8%). By contrast, there is now a fairly even split between individuals expecting a rise in property values (26%) and those anticipating a decline over the next 12 months (23%).
Moore continued: “While it is too early to evaluate the full impact of the EU referendum on the UK property market, it is already clear that heightened uncertainty has cast a shadow over household sentiment. At the same time, fundamental imbalances between housing supply and demand have not changed materially, while lending conditions remain supportive. Nonetheless, a sharp jolt to consumer confidence in July has impacted swiftly on UK households’ perception of their property value, and this is also a signal that price expectations could remain highly sensitive to economic and political developments over the months ahead.”