A survey has shown that, for the first time in over three years, homeowners expect the value of their home will decrease.
The House Price Sentiment Index (HPSI), a monthly indicator of how home prices will move in the future, has revealed that most homeowners think their property is worth less in July than it was in June. This is the first time since February 2013 that most property owners believe their house price has decreased rather than increased.
There was added interest in the HPSI this month since it gave the first clear indication of how homeowners think the referendum result will affect the price of their home. The survey was carried out by Knight Frank and IHS Markit between 14 and 18 July and 1,500 households from across the UK were asked their views.
With a score below 50 indicating most homeowners believe house prices will fall, the overall HPSI for July was 48.3. This compares to a score of 59.7 in June, which itself was thought to be an indication of how resilient homeowner optimism was in the lead up to the EU vote. In July, 14.6% of homeowners thought their house price had decreased compared with 11.2% who thought it had increased.
The head of Knight Frank’s UK residential research, Gráinne Gilmore, said: “It’s apparent from the HPSI results that the level of uncertainty for homeowners in the light of Brexit is high. Especially when you consider the relative confidence in the lead-up to the vote.”
This uncertainty was even more apparent in London, where the sentiment index score fell from 69.6 in June to 49.5 in July, the first time the index score has fallen below 50 there since October 2012. The only two areas where households thought their house value would rise in July were the east and south-east of England where the score for both areas was 50.2.
For the other nine regions surveyed, the majority of homeowners said they believed their house price would fall during July. However, these same households still expected their property prices to gradually rise again over the course of the following year.
Senior economist for IHS Markit, Tim Moore, said he thought the economic uncertainty brought on by the Brexit vote had, naturally, been a big factor on UK house price sentiment. He explained: “Before the Brexit vote, more than five times as many homeowners (43%) thought property prices would rise compared with those who anticipated a fall (8%). The price index for July shows the biggest drop in momentum for over seven years.”
The south of England is more optimistic about house prices rising than the north of England, Wales or Scotland. Londoners, with a score of 56.3, are the most convinced house prices will rise again in the next 12 months; the south-east is slightly less confident (54.5) as is the east of England (53.2).
However, Gráinne Gilmore thought the HPSI scores were not as bad as they could have been, saying: “Although there has been sharp drop in the index scores in some places, the results are still around the ‘no-change’ mark, comparable to readings obtained in 2012/13.”