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Drop in housing market sentiment

Drop in housing market sentiment

Category: Mortgages

Updated: 15/10/2014
First Published: 15/10/2014

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Consumer confidence in the housing market has fallen to its lowest level in 12 months, the latest Halifax Housing Market Confidence Tracker has revealed, with householders becoming increasingly unconcerned about the possibility of price rises.

The quarterly Tracker, which monitors public sentiment towards the housing market, shows that 68% of respondents think that house prices will rise in the next 12 months (down from 71% in the last survey), while 6% think they'll fall. This gives a balance of +62 for the third quarter of the year, down from +66 in the previous three-month period, and +64 in the third quarter of 2014.

An encouraging figure is that the proportion of those expecting excessive price rises – more than 10% but less than 15% – has seen a clear reduction, falling from 11% of respondents in the last quarter to just 9% today.

And it looks as though they could be right to not expect serious increases. The recent run of house price statistics have all pointed to a stabilising market, and although they all still show robust annual price rises, many growth rates have remained unchanged or have even fallen in recent months.

The latest dataset for comparison, the monthly house price index from the Office for National Statistics (ONS), shows that UK house prices increased by 11.7% in the 12 months to August 2014 – entirely unchanged from the annual growth rate recorded in July.

It's prices in the capital that are still driving momentum, too, with house prices in London seeing growth of 19.6% year-on-year. Conversely, the slowest pace of growth was recorded in the North East, with prices increasing by just 3.8% over the year, which indicates that excessive price rises clearly aren't a national phenomenon. Excluding London and the South East further highlights the divergence, with UK house prices increasing by a more modest 7.8% over the 12 months.

Nonetheless, the typical UK home is priced at an eye-watering £274,000, so it's perhaps understandable that being able to raise a suitable deposit is still the biggest barrier to homeownership.

According to the Halifax survey, this is the most frequently-mentioned barrier to buying, with 57% saying that raising a deposit is an issue. However, this has fallen from the 63% who said this a year ago, so it looks as though things could be improving.

That may not be the case for household finances, however, as the proportion citing this as a barrier has risen 11 percentage points in the last three months, rising from 28% to 39%. An increasing number mention concerns about interest rate rises as a barrier, too, with 19% citing this as a concern, up from 18% in the previous quarter and 11% this time last year.

All in all, it's a mixed picture for the sector, and with such uncertainty over base rate changes and house prices, it's no wonder consumer confidence is dipping.

Craig McKinlay, mortgages director at Halifax, said: "In the last three years consumer confidence in the outlook for the housing market has increased significantly. For the last year, however, it seems to have reached a ceiling and, with speculation as to the strength of the economy increasing in the last few months, confidence has fallen to its lowest level in 12 months."

This dip mirrors the fall in confidence over the outlook for the economy as a whole, it said in the report. However, all is not lost – it noted that the difference between those who think it's a good time to buy and those who think it's a good time to sell has reduced considerably, a positive move for both sectors.

The figures show that a balance of +19 think it's a good time to sell and +11 think the same about buying, compared with the respective balances of +25 and +5 in the previous quarter, suggesting a more stable market for everyone concerned. So why not take advantage of it? If you've managed to raise a deposit and want to get on the ladder before interest rates rise, now's the time to get searching – there are some great deals to be found.

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