New figures have shown property specialist Simon Morris that UK house price sentiment slipped in July 2015, however people still believe that house values are rising.
UK house prices
The UK’s residential property market has continued to flourish in 2015. The Office for National Statistics’ May 2015 House Price Index shows that the average UK house price rose 5.7% in the year to May 2015, a small rise from its lacklustre growth rate of 5.5% in the 12 months to April 2015.
House price sentiment
The average UK house price may be growing, but public sentiment concerning residential property values fell slightly in July 2015. House price sentiment is measured by Knight Frank’s and Markit Economics’ House Price Sentiment Index, which slipped from 59.5 in June to 58.6 in July.
According to Property Wire, an Index reading of 50 or higher indicates that UK house price sentiment is positive. The Index has been in positive territory for the past 28 months in a row and although it fell in July, it remained above 50. This suggests that property owners in the UK still believe that the value of their home is rising.
Growth of house prices
Markit Economics senior economist Tim Moore explained that UK house price sentiment currently rests comfortably above the year and a half lows the Index registered in February 2015. He said that “a gradual rebound in households’ property value perceptions has been underpinned by strong demand conditions so far this summer, alongside an underlying lack of supply and the continued low mortgage rate environment.”
The head of UK research at Knight Frank, Grainne Gilmore, elaborated, saying that “overall expectations for future house price growth remain firm, underpinned by a strengthening labour market, improving economy and ultra-low mortgage rates.”
Gilmore went on to say: “There is now more discussion about possible interest rate rises, but this, as well as the property tax announcements in the Summer Budget, has had little impact on average expectations for the direction of travel for house prices.”
What this means for investors
Therefore, the release of Knight Frank and Markit Economics’ latest House Price Sentiment Index indicated that people still believe that the value of their home is increasing. A number of factors suggest that this could continue, if at a steadier pace, throughout the rest of 2015.
This could lead investors to believe that now’s the time to invest in the UK residential property market, but Simon Morris would urge them to be cautious. Investors should download Simon’s guide to property investment in 2015, which will provide them with the information they need to know to calculate the risk/reward ration of investing in the UK’s housing market.