Confidence in housing market reaches two year high

Four-fifths of homeowners expect property values to rise over the next six months, according to the Zoopla.co.uk quarterly survey of housing market sentiment. Of the 6,682 homeowners surveyed, 79% believed home values will rise, with only one in ten (11%) predicting that values will fall over the next six months.

Overall, those surveyed predicted average house values in their area will increase 5.4% over the next six months, but are even more optimistic about the prospects for their own homes, which they believe will rise by 5.8% - faster than their neighbours’. Housing transactions show an 80% correlation to the Zoopla.co.uk confidence index, and lag movements in confidence by around three months, indicating that rising confidence will push transaction volumes higher in the coming months.

But homeowners’ optimism for the outlook in the housing market is not shared by renters as 42% of renters surveyed by Zoopla.co.uk think house values in their area will either remain unchanged or decline in the coming six months. Renters are also least hopeful about the availability of mortgage finance with over three-quarters of renters (76%) saying it is no easier to obtain a mortgage now than three months ago. Yet, despite the difficulties in securing a mortgage, over half of renters (53%) indicated an intent to try to buy in the next six months.

Overall, homeowners believe that the clearest sign of a property market recovery is seeing the level of transaction activity in their area increase from the recent lows. The Scots are most optimistic about the housing market outlook, with 83% expecting the value of their home to rise over the next six months, compared to 79% in England and 78% in Wales. Homeowners in Northern Ireland are least confident, with almost a third (31%) predicting their home values will fall or remain flat in the same period.

Alex Chesterman, CEO of Zoopla.co.uk, said: “Optimism in the property market is climbing back to levels not seen since before the credit crunch began in 2007 and is four times higher than it was in the depths of the decline earlier this year. Confidence drives transaction volumes, which in turn drives house prices. But with lending remaining constrained, transaction volume cannot recover as strongly as demand suggests it should, and the inability of first-time buyers to get a toehold on the housing ladder is the biggest single risk to the housing market recovery.

“The majority of homeowners believe their own home will rise in value at a faster pace than the average home in their local area, most notably in London and the South East, where it seems an Englishman cannot escape the view of his home as his castle. The record levels of traffic to Zoopla.co.uk, the UK’s leading property market resource, with over 1 search per second recently is another strong indicator of the rising interest and confidence in the housing market.”