The housing market: what the public thinks

“We expect the various policy initiatives to generate a modest expansion in lending and a pickup in [housing market] activity, with transactions set to hit a million this year – this would be the highest level since 2007. This should also be sufficient to generate a steady increase in house prices over the next couple of years... Beyond that, the recovery should gain greater momentum, as credit availability improves and strengthening incomes and rising employment provide further support.”

This assessment is important because it comes from the ITEM Club, the only non-governmental economic forecasting group to use the HM Treasury model of the UK economy. Their spring forecast, published last week, follows other predictions that mortgage rates will fall and house prices rise¹ after a budget generally expected to boost the housing market (and leading to some speculation of another housing ‘bubble’).

Crucially, most consumers also expect house price rises. The latest Halifax Housing Market Confidence Tracker published last week and based on interviewing undertaken mostly after the budget² , recorded a House Price Outlook (HPO) of +33. The HPO is the balance of the proportion of the public thinking the average UK house price will be higher in twelve months time less those who think it will be lower, and +33 is the highest so far across our eight surveys³. This latest measure comes at the traditional Easter-time start of the house-buying season and compares to +9 in the spring two years ago and +18 in March 2012.

But, at the same time, our series of surveys for Halifax also includes strong pointers to subdued activity in the market. The eight measurements to date have consistently recorded 50-55% considering it a good time “for people in general” to buy property, 30-35% thinking it a bad time. But sentiment on selling has always been more salutary. While HPO has moved from +9 to +33 over the period since April 2011, the proportion who think it a good time to sell, now 21%, is little changed on the original 18%.

The public’s view has consistently and firmly been against selling independent of price expectations. And, only 16% currently think the coming twelve months will be a good time to sell and to buy. A shortage of supply – in this case people deciding to stay-put rather than sell-to-buy (but also the much talked about national shortage of new homes) – could contribute to price rises. On the demand side, Ipsos surveys have shown a continued desire to buy⁴ but the public identify deposit-raising and uncertain household finances as important barriers to buying.

Another factor shaping market activity, also evidenced by our survey, is the fragmented nature of the housing market and the decoupling of the South East and London markets from those in other regions. Disaggregating the national +33 HPO reveals a high of +52 in London and +46 in the South East, compared to +16 to +17 in Yorkshire and the Humber, the North East and North West.

What next? Will the housing market continue on an upward path, building on what CML Director General Paul Smee called the “best start to a year since 2008”? The spring period will provide some useful pointers and consumer sentiment will be key. This is because people’s day-to-day buy/sell (or don’t) decisions ultimately shape the state of the housing market.

Ben Marshall is Research Director, Housing, planning and development. Follow Ben on Twitter @BenM_IM.

Notes 1: Predictions from the Bank of England, the Office for Budget Responsibility and Centre for Economics and Business Research. See, for example, http://www.guardian.co.uk/business/2013/mar/14/mervyn-king-economic-recovery-housing-market and ‘Average British house to cost more than £250k’, Gavriel Hollander, Inside Housing 2.4.13. 2. The March-April 2013 tracker involved interviews with 1,702 British adults aged 16+ between 15 March and 2 April (including c.490 prior to the budget). 3. Respondents are shown the average UK house price, in this case £163,600 sourced from Halifax’s House Price Index. A fifth, 20%, expect a price rise of higher than 5%. 33% expect the average price to be unchanged. 4. See http://blog.shelter.org.uk/2012/11/guest-blog-generation-rent-still-want-to-buy/