Households in every region expect house price to rise over the next 12 months

Key headlines for June:

• Households in every region expect the value of their home to rise over the next 12 months

• Optimism over future price rises is at its highest level in three years

• Londoners are the most optimistic about house price rises over the next year, closely followed by those in the East Midlands

• Households in North East expect the most modest increase in values

• Households perceive that the value of their home rose over the last month – at the fastest pace in three years

Change in current house pricesHouseholds perceived that the value of their homes climbed in June, for the third consecutive month, according to the latest House Price Sentiment Index (HPSI) from Knight Frank and Markit.

Around 15% of the 1,500 homeowners surveyed across the UK said that the value of their home had risen over the last month, while only 8.6% indicated the value had fallen.v. The index signals that after three years of falling prices, households are increasingly confident that the value of their property has started to rise.

Households in London (59.5) reported that the value of their home had risen at the fastest rate over the last month, although the pace of increase was perceived to be slower than in May (64.7).  Households in eight other regions also reported price rises (figure 4), while three reported price falls, with the biggest declines in Wales (46.5).

A lead indicatorSince the inception of the HPSI, the index has been a clear lead indicator for house price trends. Figure 3 shows that the index moves ahead of mainstream house price indices, confirming the advantage of an opinion‐based survey which provides a current view on household sentiment, rather than historic evidence from transactions or mortgage market evidence.

Regional outlookWhile there are regional differences in the outlook for prices, respondents in all regions expect the value of their property to rise over the next 12 months. Londoners still lead from the front, with an index reading of 73.1, although this is down from 76.3 in May.  London is closely followed by the East Midlands, with a reading of 72.9, up from 55.8 in May and marking the biggest monthly uplift in expectations since the index started.

Households in the North East are expecting the most modest rise in prices over the next 12 months, with a reading of 56.2, although this was up from 52.2 in May.

Expectations for future house price rises rose strongly among the over-55s (70.3) making them the most confident that the value of their home will climb by June 2014.

This is echoed in the rise in the index reading for those who own their home outright, which rose from 60.7 to 69.3, indicating that older homeowners who have built up equity in their property are now strongly expecting a turnaround in the direction of house prices.

However, households with a mortgage are even more upbeat about the possibility of price rises over the next year, with a reading of 70.3, up from 65.2 in May. 

Gráinne Gilmore, head of UK residential research at Knight Frank, said:  “After three years of fairly bleak housing sentiment, June’s data suggests that the market has turned a corner. London leads in terms of house price expectations, but it is interesting to note the increase in confidence across most other regions. This coincides with initial evidence of some ‘green shoots’ of recovery in regional economic activity in the UK.

“It seems clear that more upbeat economic data  coupled with the Government’s multi-billion pound plans targeted at the housing market and record-low interest rates, have contributed to a sustained improvement in households’ expectations for property values.”