Just a year ago, those believing that prices would be higher in 12 months’ time outnumbered those that believed prices would be lower, by 5 to 1. Now, for the first time since the inception of this survey in January 2009, the ‘price pessimists’ (32%) outnumber the ‘price optimists’ (27%).
This represents a dramatic jump over the past year in the proportion of people believing prices will be lower in 12 months’ time, from 1 in 10 (11%) in October 2009 to around 1 in 3 (32%) this quarter, a clear reaction to the prevailing economic pressures and uncertainties. Around a quarter of respondents (27%) believe prices will be higher in 12 months’ time, while just over a third (36%) believe prices will be more or less the same. The resulting picture is one where home-movers are fairly evenly split into three different camps on the immediate direction of house prices, a picture that we have not seen previously in this, the eighth running of the survey.
Miles Shipside, director of Rightmove, comments: “If you saw such an even distribution in opinion after using an Ask the Audience, you’d probably follow very quickly by using your Phone a Friend. This time last year 56% of respondents to our survey asserted that house prices would be higher in a years’ time and that proved to be an accurate forecast. However, this quarter the majority is gone and opinion is divided. It’s unusual to see such a split, but it shows that current economic uncertainty is forcing people to take sides in their view of the housing market. When sentiment is split as it is, or when there is no clear and prevailing view, a typical reaction from potential home-movers is ‘no action’”.
Whilst it is well documented that prospective buyers are currently hampered by restrictive mortgage availability, our findings indicate that there are more fundamental worries about the economy and housing market. Nearly half of those who believe that prices will be lower in 12 months’ time cite ‘economic concerns’, either through a lack of confidence in the economy in general (27%) or concerns about a ‘squeeze’ on household incomes (20%), as the main reason. In the opposing camp, however, more than a third of those who believe prices will be higher cite an increase in confidence in the economy generally (34%) as the main reason for their view.
Therefore, the impact of the Comprehensive Spending Review in restoring confidence to the wider economy will have a crucial knock-on effect on price sentiment among home-movers.
Shipside adds: “After months of speculation, the realities of the Government’s Comprehensive Spending Review are upon us and it is clear from this survey that the success or failure of the cuts in the wider economy will have a big impact on the property market. It will be interesting to see whether the rise of the ‘price pessimists’ will continue given the new economic landscape.
However, it shouldn’t be forgotten that a drop in house prices improves affordability and may bring prices into reach for some potential buyers currently unwilling or unable to proceed.”
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