The survey also finds that the proportion of those expecting house prices to be lower in 12 months’ time is also at its lowest level (20%) for seven quarters.
Miles Shipside, director at Rightmove, comments: “While the most common view remains that property prices will be about the same one year from now, this is the most upbeat price forecast Britain’s homemovers have delivered in nearly two years. Confidence plays an important role in motivating those who can afford to buy to actually go ahead and transact. By self-selection, many of them are hunting in the same better-heeled locations which in turn builds greater momentum and price rise expectation in these more affluent areas. Conversely, lower levels of activity in less well-off areas spreads negative sentiment fuelling falling price confidence.”
Respondents were asked to explain the main reason for their price predictions and, interestingly, mortgage-related issues feature prominently in both the price optimist and price pessimist camps. Among price-optimists, 35% report an improving mortgage market and a further 14% identify continued low interest rates as the main reason for their view that prices will be higher 12 months from now.
Mortgage-related concerns are even more prevalent amongst price pessimists with nearly two-thirds (64%) collectively citing the following reasons for their negative price outlook: little or no improvement in mortgage availability (33%), high deposits required by lenders (16%) and fear of interest rates rising (15%).
Shipside comments: “The mortgage market continues to occupy home-movers’ thoughts and there is evidence here that house price confidence is steered by their interpretation of mortgage availability. How you read it, which probably depends on whether you are ‘included’ or ‘excluded’ as mortgage-worthy by the lenders, seems to determine what you think will happen to prices. Those with larger deposits will naturally have a more positive interpretation of access to finance and, therefore, prices.”
Half of those intending to buy in the next 12 months state that finding a suitable property to buy is their single biggest concern. This has risen consistently from 36% two years ago and 44% a year ago to 50% now. Rightmove has previously reported that fresh property choice coming to market remains subdued at around 35% below 2007 pre-credit-crunch levels. The most active buyer markets tend to be those where the cash-rich wish to live, leading to suitable property shortages and rising prices.
Shipside, observes: “Those looking to buy this year say their biggest concern is finding a suitable property to buy. This is leading a big chunk of those at the sharp-end of the property market to forecast higher prices as the lack of suitable choice will encourage them to pay a bit more to secure the right home when they find it. Those who can proceed will often be competing in the same locations as other deposit-rich buyers which could lead to increased rivalry for the most appealing properties.”
One of the features of this downturn is that property prices have held up or recovered better than many anticipated. This has not aided a return to the levels of affordability seen in previous downturns, which has been one of the factors in keeping sales transaction volumes muted. Indeed, nearly half (46%) of those surveyed state they felt property prices in their local area are above fair and reasonable levels.
Shipside adds: “In spite nearly half of people stating they think property prices are top heavy in their local area, the overwhelming view is that property prices will be the same or higher in a years’ time. Those that are active in the market are perhaps looking in the better areas so their view is likely to be influenced by more buoyant conditions in cash rich locations. The less active deposit-poor areas will be those where prices will have to be dropped if a seller is keen to sell.”
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