The May survey by assertahome.com has detected the first signs that interest rates are starting to affect househunters' sentiment.
The survey shows that balance of confidence in the market has tipped markedly towards the pessimists. Between January and April, on average 84.3% of assertahome.com's respondents believed house prices would rise over the following 12 months. In May this dropped sharply to 77%.
Despite recent commentary to the contrary, asserta says it is clear that househunters have indeed noticed the recent increases in interest rates. Between January and April 2004, half of the house price optimists cited continuing low interest rates as a key reason to explain their optimism. In May this dropped sharply to 40%. By the same token, the growing minority of respondents who believe prices are going to fall are increasingly blaming rising interest rates. Seven in 10 of these pessimists now think rising rates will push the market into a downturn compared to an average of 57% between January and April.
Additionally, half the pessimists now believe property investors bailing out of the market will contribute to a downturn compared to just one third in the previous four months.
Jim Buckle, managing director of assertahome.com, says: “Househunters across the UK still overwhelmingly expect house prices to continue rising over the next 12 months, but those in the pessimist camp are steadily growing. Optimists and pessimists alike, however, are now far more acutely aware of the role interest rates are going to play in the direction of the housing market in the year ahead than they have been since the interest rate cycle turned at the end of November.
“Our survey shows that housebuyers and sellers have clearly taken note that interest rates are on the up and this has begun to dent confidence in the housing market. Thursday's interest rate increase can only accelerate this process. The Bank of England should beware of overly aggressive interest rate hikes.”
The south-east of England has shown the most dramatic drop in confidence and languishes far at the bottom of the league. The survey shows that in May just 68% of south-eastern househunters expected prices to rise in their region. This is less than the national average and far below the bullish Yorkshire and Humberside where 93% are optimistic about the outlook for the next 12 months in their region.
South-eastern househunters expect a meagre 0.8% increase in prices compared to 10.9% in Scotland and 10.3% in Yorkshire and Humberside. The northernmost parts where the market has been most active of late remain the most confident.