House price sentiment improves

A higher number of households across the UK perceive that the value of their home increased this month compared with July, according to the latest house price sentiment index to be published.

Some 15.2% of the 1,500 households surveyed for the index from Knight Frank and Markit Economics across the UK said that the value of their home had risen over the past month, while 12.4% said that prices had fallen.

The rise in perceived property price growth resulted in a HPSI reading of 51.4 in August. Although this level is low compared with recent readings, it marks an improvement on last month’s 48.3 figure, which was calculated immediately following the UK’s vote to leave the EU. A reading above 50 signals an increase in residential property prices.

Once again, there was a regional disparity in the index readings, with respondents in six of the 11 regions covered by the index believing that prices increased over the course of the month, led by households in the East of England, followed by those in the South West and South East.

“The regional variations in the index are striking in August, with households in several regions expecting a stronger rate of price growth over the next 12 months than those in London, a reversal of the trend seen in recent years,” said Gráinne Gilmore, head of UK residential research at Knight Frank. 

The future HPSI, which measures what people expect to happen over the next year, rose to 58.3 in August from 50.3 in July. However, while the month-to-month growth is significant, long-term expectations are less so. In fact, the last time the future sentiment index was below 60 for two months in a row was in March 2013.

Gilmore added: “The greater political confidence instilled after Brexit by the swift appointment of a new Prime Minister, coupled with the Bank of England’s base rate cut have provided some reassurance to markets in recent weeks.

“This is reflected in a tick up in the HPSI, although uncertainty about the medium-term outlook is weighing on sentiment overall.”