Confidence in UK housing market is falling

The Halifax Housing Market Confidence Tracker has shown a 14 point reduction indicating that investors are concerned about the state of the UK housing market. The index fell from 44 in April 2017 down to just 30 in the latest report in October 2017. This is a dramatic 38 point fall from May 2015 when the confidence tracker stood at 68. So what does this mean for UK property prices?

Falling prices?

When you read the headlines over the next few days you might be forgiven for assuming we are on the verge of a house price crisis in the UK. The headlines will make full use of the dramatic fall in confidence but if you dig a little deeper, just below the surface, things are not as dire as some would make out….

A substantial 50% of those who took part in the survey still expect house prices to rise over the next 12 months. While this is the lowest level since April 2013 (45%) it has not yet quite tipped over the edge towards expectations of a house price collapse! The survey also shows that 20% of respondents believe house prices will fall over the next 12 months with 30% not giving a strong opinion either way. So, while the headlines will suggest a drop in confidence (which is correct) the majority of people still expect house prices to increase over the next 12 months.

Barriers to homeownership

The Halifax Confidence Tracker does give a very interesting indication of the underline opinion of the UK population. As an example, 61% of those who replied to the survey said that raising a deposit was the greatest barrier to homeownership followed by job security which was mentioned by 42% of those who replied. This would indicate that the UK government’s policy of tightening mortgage regulations is impacting potential homeowners who are struggling to raise the required deposits.

It was interesting that 42% of those who responded cited job security as one of the main difficulties in climbing onto the property ladder. This comes at a time when the UK economy is under great scrutiny, there is concern about the impact of Brexit and nobody knows with any certainty what will happen in the short to medium term. The longer term situation is perhaps not as dire as many are making out, with the UK already lining up an array of international trade deals to try and offset any problems with an EU arrangement.

London property prices

As we have mentioned on numerous occasions, the London housing market is very different to the rest of the UK. The net balance of people looking towards the London property market turned negative both for buying and selling in the capital over the next 12 months. The figures were -3 and -17 respectively which does not bode well for the short to medium term. However, we already knew that the London property market would struggle in the short to medium term, with the issue of financial giants moving elsewhere still grabbing the headlines, but London has been through far worse than this and still come out in good shape.

The next 12 months will likely be tricky for London and perhaps the rest of the UK but, as we have also mentioned on numerous occasions, those who continually suggest the EU is negotiating from a stronger position than the UK seem to have forgotten the disastrous EU economic performance of the last decade?

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