Slowing property prices make UK owners less optimistic, research shows

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Less optimism seen in UK property market

Almost 80% of property owners in the UK still expect prices to rise in the next five years and only 11% believe prices are set to decline over the same period according to new research.

Some 60% believe house prices will recover in the next two years, but the size of this increase is 1.8%, down from 3.2% in August and significantly less than the prediction of an increase of 5.4% a year ago.

Optimism has also waned in the longer term, as owners currently expect property prices to grow by only 6.9% in the next five years, down from a predicted 10.6% a year ago, the research report from Your Move, the largest single estate agency brand in the UK, shows.

If prices change as home owners expect, they will increase by on average £4,000 by spring 2013 and £15,360 in 2016 according to latest figures from the LSL/Acadametrics house price index.

‘Slowing house price growth has clearly taken its toll on home owners’ confidence and, alongside the clear risks to the UK’s long term economic health, this has made prices fall,’ said Gareth Samples, managing director of Your Move.

‘But cash buyers and those able to obtain mortgage finance with large deposits are able to gets great value as a result. The strongest downward force on property prices is how hard it is to get a mortgage and while it may be some time before lenders loosen their purse strings, home owners know that once finance becomes more readily available, prices will recover,’ he added.

Homeowners expect the value of their homes to fall slightly in the next 12 months, Just 37% of homeowners expect house prices to rise in the next 12 months, compared to 75% this time last year. This increased pessimism is reflected in homeowners’ expectations for price changes. The typical homeowner expects prices to fall by 0.6% in the next 12 months, down from an expected rise of 0.7% in August 2010 and 2.8% in April 2010.

Although homebuyers were less optimistic about future house prices, many were unaware of how much their property’s value had increased. According to the survey, nearly a quarter of homeowners, 23%, believed their home had decreased in value since they bought it.

The average homeowner has owned their house for just over nine years and believes in that time their property has increase in value by 72%. If this increase had occurred, the average increase in value for homeowners would be £92,176 between March 2002 and March 2011. But for the same period the average house price has actually risen by £102,890. This means homeowners may be underestimating the values of their homes by more than £10,000.

‘If you take a long-term view of the property market, it’s easy to see what a good investment bricks and mortar has been in the last decade. Despite the downward pressure exerted by the recession and the drought in mortgage finance, prices have almost doubled in the last decade,’ said Samples.

‘Although it seems people don’t necessarily realise how much their property is worth. The average homeowner may be sitting on an asset worth £10,000 more than they think, which demonstrates just how good an investment property was at the beginning of this century,’ he added.

Mortgage lending has come more strongly into focus since August last year, as now three quarters of would be buyers who say they are unable to purchase a home cite the availability of mortgage finance as the main reason, up from 70% last summer. However, the number of buyers complaining of an inability to muster an adequate deposit fell since August from 71% to 66%.

‘It would be rash to assume a static housing market means there aren’t enough willing buyers out there to push prices up. The current problem is that they’re willing and unable, because there isn’t much mortgage finance available. But the fact that prospective buyers are increasingly positive about their ability to put together a sufficiently large deposit means we could see an explosion of pent up demand when and if mortgage lending picks up,’ concluded Samples.

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