Confidence in the UK housing market is at its lowest level in over a year, according to the latest quarterly Halifax Housing Market Confidence Tracker.
The latest fall comes after a downward trend since a high point in May 2015, and comes as consumers feel increasingly uncertain about the wider economy.
Despite this downward trend, 65% still believe that average UK property prices will be higher rather than lower 12 months from now, double the 32% found when the tracker was launched five years ago in April 2011.
The proportion of people who think the average UK house price will be at least 10% higher in 12 months’ time remains unchanged since December 2015 at 13%. However, the proportion who are unsure of the direction that house prices will go has risen six points, the first time it has hit double figures (13%) since spring 2013, suggesting there is growing uncertainty around the property market.
Longer term trends have seen HPO improve from a net balance of +9 in April 2011 to +56 currently. The HPO peaked at +68 in May 2015 around the time of the general election, whereas the lowest level ever seen was -2 in October 2011. UK average house prices over the period have risen by £54,026 from £160,785 (April 2011) to £214,8112 (March 2016).
Although stronger than the levels seen in 2011, separate surveys by Ipsos MORI have found that confidence in Britain’s wider economy has deteriorated over the past year, with the number of people who believe that Britain’s general economic conditions will improve over the next 12 months (EOI) dropping more sharply than HPO during the same period. Net balance has dropped to -17, the lowest since March 2013, but still well above its lowest level over the past five years (-48) in December 2011.
Martin Ellis, Halifax housing economist, said: “We are starting to see growing pessimism amongst consumers in the general economic outlook for Britain.
“However, the ongoing acute supply/demand imbalance in the property market continues, which together with continuing low interest rates and a healthy labour market, indicate that house prices are likely to continue to grow in the coming months.
“As a result, the gap between house price optimism and economic confidence is at its widest in five years, but both are tracking downwards.”
There has been a small rise in net selling sentiment since December 2015. The balance of those thinking the next 12 months will be a good time to sell, less those who think it won’t, has moved from +26 to +31. Now, 56% of people think the next 12 months will be a good time to sell (up slightly by one point from December 2015) compared to 25% who expect it to be a bad time to sell (down by 3 points).
However, buying sentiment has dipped from +23 to +18 – the lowest it has been since September 2014. As a result, the gap between buying and selling sentiment (13 points) is now wider than it has been since July 2014. This means that buying sentiment is little changed over the history of the survey, in contrast to selling sentiment which improved as people came to expect rising prices:
There are marked differences when buying sentiment is broken down regionally. When asked whether the next 12 months would be a good time to buy a property, sentiment is most positive in Scotland (+41). It is lowest in London (-19), Wales (+7) and Southern England (+18).
Conversely, those living in the South of England and London think the next 12 months will be a good time to sell (+50 and +46 respectively), compared to Wales (+2), Scotland (+6) and North-East England (-19).
Being able to raise enough deposit remains the biggest perceived barrier to people buying a home, with over half choosing this as a reason from a list (52%, down by 6 points from December 2015). Job security remains the number two reason, at 40% (down by 2), having been the top reason when the Tracker started in 2011.
The proportion of those considering rising property prices to be a barrier remains on 37%. UK average house prices now stand at £214,8112 following a 10.1% annual increase.
Ellis added: “Difficulties in raising a deposit, concerns about job security and high property prices remain the main barriers to people buying a home. Of these, rising property prices is clearly much more of an issue for people than it was five years ago.”
More than half of people do not expect the recent budget announcements to make any difference to people looking to buy a home (53%), or sell a home (55%). Slightly more expect the measures to be bad for buyers and sellers (16% and 15% respectively) than good for them (12% and 11%).