House prices: up, up, up?
Barely a day goes by without the publication of new statistics showing house price rises, increases in mortgage approvals or estate agents taking on new staff. Expert views are two-a-penny but what do the public expect to happen next?
This is important; analysis by academic Andrew Farlow in the mid-2000s led him to conclude that consumer (and lending) behaviour was more important in shaping price rises than the ‘fundamentals’ of demand and supply. And Knight Frank’s own index of expectations – based on what people think will happen to their own property prices – is, they say, “…a clear lead indicator for house price trends.”
Certainly prices are trending upwards; the evidence is that house prices are rising in all of the UK’s regions, most sharply in London. Hardly a day goes by without a fresh warning about the risk of a bubble, and two months ago Danny Dorling said that “It looks like a bubble, it feels like a bubble…” Others, though, say this is ‘hysteria’.
Against this backdrop, Phase 2 of the Help to Buy scheme was launched earlier this month. On face value it seems to respond to something our regular survey work for the Halifax has shown to be an important barrier to house buying; in all ten of our surveys, the difficulty of raising a deposit has come top, or second top, as a barrier to buying.
The concern, though, is that this demand-side injection will inflate prices without increases in supply. For now, our new evidence suggests that consumers are picking up confidence cues and strongly expect price rises. Our latest survey for the Halifax, involving interviewing last month, recorded a record-ever House Price Outlook, that is the balance of those who expect the average UK property price to increase (now 70%) less the proportion who think it will fall (6%). The HPO is now +64, up from +40 in June, +15 in October 2012 and -2 in October 2011.
But our survey for Halifax goes beyond price expectations; for example, we also ask whether people think it would be a good time to buy, and to sell. Our latest data shows more equilibrium in the market than we have seen in the nine previous surveys. Now, 30% of the public think it is a good time to buy and to sell. It was 9% in the previous two Octobers.
These improving sentiments might aid the market. If would-be sellers are more bullish they may be less inclined to wait, boosting turnover, but higher selling expectations might also help to push up prices. There are, though, some potential brakes on this – principally, our polls show that increased bullishness about the national economy has not fully filtered through to similar optimism about household finances.
What next? On the one hand, many are welcoming renewed vigour in the housing market. On the other, more of the public don’t want to see price rises than do, which is exactly what they expect to see happen.
