Housing market euphoria hits the brakes

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halifax house prices

Exuberance among homeowners is starting to look frothy as fewer people thought the value of their property rose in November.

According to the latest Halifax House Price Sentiment Tracker 14% of those asked felt the value of their home rose over the last month, down from 17% in September and October.

While this is significantly above the low of 4% Halifax recorded during the first national lockdown in May, it marks a bump in the road for the optimism and record property price rises of the last five months since the first round of restrictions were lifted.

Households in the East of England, Wales, London and the North East of England, felt the value of their home had fallen, with the rate of decline sharpest in the North East.

Russell Galley, Halifax managing director, said the softening of expectations from October, which remain subdued by historical standards, “is unlikely to change significantly while the macroeconomic landscape remains uncertain, with most housing market experts predicting greater downward pressure on house prices as we move into 2021”.

More people think their house will be worth more in 12 months’ time than those who think it will be worth less, however.

Just over a quarter (27%) of households believe the value of their home will have increased by this time next year, compared to just 16% back in May.

One in five people (18%) now think the value of their property will be lower in 12 months’ time, down from a peak of around one third (34%) of respondents in May.

Households in the South West of England were most confident of higher property prices in the next year, while in the North East of England sentiment turned negative for the first time since August, albeit only slightly.

Tomer Aboody, director of property lender MT Finance, said:

“Confidence is always key for the housing market. Current sentiment continues to be strong, with the perception that prices will continue rising in the near future at least. This is persuading buyers to purchase now rather than wait in the hope that prices may fall.”

Renters who do not plan to purchase a property in the next two years revealed the factors holding back their purchases. Two-thirds said a lack of savings. Other common issues included not earning enough (55%) and a poor credit score (26%).

Around 8% of UK households said they planned to buy a property within the next year, 13% within two to five years, and a further 14% planning to purchase within the next five to 10 years.

Aboody added:

“Interesting times are on the horizon, with the first quarter of next year seeing the end of furlough and the stamp duty holiday, plus the Budget. Future sentiment is therefore very much in the hands of the Chancellor, who has some difficult decisions to make.”

The potential of high LTV mortgages, as set out by the government, and the probable extension of stamp duty relief, would also keep sentiment strong, Aboody added.

One in 10 households in London and the South East are planning a property purchase in the next 12 months, according to the Halifax survey. At the other end of the scale in Scotland just 2% of households surveyed expect to make a property purchase in the coming year.

People aged between 25 and 34 are the most likely to be considering buying a home in the near term (13% of respondents), compared with just 6% of those aged between 18 and 24 and an even smaller proportion of those aged 55-64 (3%).