North/South: Mind the property price gap

A sharp north-south divide is developing in Britain over expectations of rises in house prices during the coming year, according to new survey findings.

UK housing
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While the latest House Price Sentiment Index (HPSI) from Knight Frank and Markit Economics found that households from all UK regions believed that the value of their homes rose in February, the perceived growth was far higher in London than in Scotland.And, while people across the UK believed their properties would increase in value over the coming year, optimism was higher in South East England than anywhere else.The report said that 23.2 per cent of the 1,500 households surveyed felt the value of their homes had risen over the previous month, with only 4.1 per cent believing they had fallen. This resulted in an HPSI reading of 59.6 in an index where any reading above 50 represents positive sentiment. It was the 35th consecutive month when sentiment had been in positive territory."February's reading was the highest recorded by the index since October 2014, indicating that households perceive that the value of their home rose at its strongest rate since then," said the report."However, February's reading remains well below the peak of 63.2 reached in May 2014, reflecting the easing in average UK house-price growth seen since then. Households in all of the 11 regions covered by the index reported that prices rose in February, led by households in London (68.1) and the East of England (62.3)."The lowest sentiment readings were recorded in Scotland (51.7) and North East England (53.0), indicating that households in these regions perceived the most modest rise in prices across the UK in January.Gráinne Gilmore, head of UK residential research at Knight Frank, said, "The HPSI indicates that house prices are set to continue to tick up modestly in the coming months. The market is being underpinned by the solid economic recovery and ultralow interest rates – which now look as if they will stay put for some time to come."However, a key dynamic of the UK housing market is that it is highly regionalised in terms of price movements. "The average annual spread of future HPSI readings – the difference between the lowest and highest readings across the regions – reached a new high this month, with households in the South of England expecting stronger growth than those in the North. This signals that the regionalised nature of the market is unlikely to unwind in the short term."
Tim Moore, senior economist at Markit, added, "February's survey highlights a continuation of the steady upward trend in UK house-price sentiment from the pre-election lows seen in early 2015."While pay growth has been sluggish and the economic outlook weakened in recent months, a resultant expectation that interest rates will stay low for longer seems to have boosted UK house-price perceptions at the start of 2016. "In fact, survey data from Markit indicates that less than half of UK households (46 per cent) expect a Bank of England rate rise over the next 12 months, down sharply from 71 per cent in January and the lowest proportion since October 2013."The latest edition of Knight Frank's Global House Price Index, meanwhile, reveals that housing affordability is rising up policymakers' agendas worldwide.According to the latest data from the Organisation for Economic Cooperation and Development, which measures house prices against incomes for 24 of its 34 members, Belgium and New Zealand are currently the world's least affordable markets, whilst home ownership is most accessible in South Korea and Japan. Relocate Global Spring Issue 2016

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© 2016. This article first appeared in the Spring 2016 edition of Relocate magazine, published by Profile Locations, Spray Hill, Hastings Road, Lamberhurst, Kent TN3 8JB. All rights reserved. This publication (or any part thereof) may not be reproduced in any form without the prior written permission of Profile Locations. Profile Locations accepts no liability for the accuracy of the contents or any opinions expressed herein.

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