House prices fell for the 21st consecutive month in March, according to the latest House Price Sentiment Index (HPSI) from Knight Frank and Market Economics. The house price index, which is based on a nationwide survey of 1,500 households, showed that London was the only region where households felt that the value of their property was higher this month than last.
But the survey, which also asks households about what they think will happen to the value of their home over the next 12 months, gave the most upbeat reading for future house prices in nearly two years, perhaps reflecting the slightly more positive news from the economy. The future house price index climbed to 54.3 in March, up from 50.2 in February.
Any figure under 50 indicates that prices will fall, and the lower the figure, the steeper the decline. Any figure over 50 indicates that prices will rise. Households in six of the 11 regions expect the value of their homes to rise over the next year.
Households in London (65.2) expect the strongest rises, with those in the east of England (56.2), the south east (60.2) and the south west (58.1) also expecting prices to climb.
Sentiment about future house prices has also risen sharply in Wales (55.1) and Scotland (56.3). But households in the Midlands and the North of England are more downbeat, with those in the North East (43.6) expecting the biggest falls in the value of their home over the next 12 months.
Yorkshire households are seemingly keeping an open mind, at an index reading for the region of 48.7, (up from 43.7 in February) and close to the important watershed of 50.
So what does this mean for the market in Yorkshire during 2012? An increase in confidence seems to be endorsed by the 10 per cent increase in our index from February to March. Notwithstanding allowing for seasonal variance as we move towards the traditional spring market, all agents are reporting an increase in viewings with resultant offers from potential purchasers. Those who are in a position to proceed quickly, for example living in rented accommodation having already sold, are looking to negotiate from a position of strength but these buyers do need to realise that not every seller is desperate and prepared to reduce their price by a significant percentage “because it is cash”. To expect a vendor to consider a 15 per cent to 20 per cent drop on their asking price within the first week of marketing is perhaps a little unrealistic.
There is a spring like feel to the market and one can only hope that this positive viewpoint on the market continues, albeit in a market place where realism remains a watchword, a view that seems to be endorsed across Yorkshire by our Index.
In the short term the debate about stamp duty will inevitably be an issue to potential purchasers, both at the top and lower end of the market. For sales taking place in Yorkshire above £2m, there will be marginal impact on the market, perhaps with some taking a view that if you can afford to acquire a property at this level, then you can certainly afford the additional duty.
With the end of the stamp duty holiday on properties up to £250,000, we expect this will be reflected in negotiation by some potential purchasers. If one looks at it in the round, the actual additional purchase costs that arise are modest in the context of the overall cost of acquisition and the cost of longer-term ownership and as such, we do not believe the market place will be significantly affected by the reintroduction of the tax.
Our National House Price Sentiment Index (HPSI) is proving to be a very useful indicator and we will be monitoring it carefully as we move through the course of 2012.
Tim Waring is a partner of Knight Frank and heads their estate agency team in Yorkshire.