Property Optimism Falls To Lowest Level For 18 Months

Property Optimism Falls To Lowest Level For 18 Months

Property Optimism Falls To Lowest Level For 18 Months

UK property price optimism among private rental sector landlords and residential property owners has dropped to the lowest recorded level for 18 months after buy to let mortgage lending in January was reported to be decidedly sluggish.

Traditionally, the UK property market generally experiences a slow start that incrementally builds to a summer buying frenzy before reaching another plateau and then a further period of increase followed by a gradual easing at the end of the year.

The latest Halifax House Price Index (HPI) found that UK property prices increased by just 2% in January 2015, reaching a new UK average property price of £193,130 (GBP).

Combined with figures released by the Department of Communities and Local Government, showing a slowdown in the number of new homes being built, and it is clear why landlord and residential property owners optimism has fallen.

60% of landlords and property owners, surveyed for the lender’s latest housing market confidence tracker report, expected the average property price to be significantly higher in 12 month’s time.

This means that house price optimism has fallen by 10 points from 62 to +52, the lowest level of consumer confidence since June 2013, when 52% of private rental sector landlords and residential property owners expected a large rise in property prices.

So what’s different?

  • In June 2013 UK inflation was at 2.9% compared to the current 0.3%
  • Employment was just over 30 Million compared to today’s figure of 30.9 Million
  • Mortgage lending levels were at £15 Billion (GBP) compared to the current £17 Billion (GBP).

Despite the fact that the UK’s Gross Domestic Product (GDP) for 2014 increased by 2.6% and all members of the Bank of England’s (BoE) Monetary Policy Committee (MPC) voted to hold interest rates at 0.5%, the dip in confidence levels over UK property prices reflects public concern over the UK economy in general.

Craig McKinlay, mortgages director at the Halifax said that “More than half of consumers still believe UK property prices will be higher than they are now in a year’s time; however optimism has continued to weaken. Despite this we’re now seeing a return to the seasonal trend for house price activity”.

But he pointed out that of more concern are the figures from the Department of Communities and Local Government showing a slowdown in the number of new homes being built. ‘It’s widely acknowledged that the UK needs an increase in the amount of new housing being built,’ said McKinlay.

‘The Lloyds Banking Group Commission on Housing targeted 2 to 2.5 million new homes built by 2025 new homes to be built before 2025. If we are to address demand the increase in new homes coming onto the market needs to be sustainable,’ he explained.

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