The HPSI is used to get an early indication of trends in house pricing by surveying whether homeowners think their properties are increasing in value. From there, the researchers can carefully analyse the data in order to predict upcoming trends. Given the demonstrable and strong correlation between the HPSI and following increases in house prices, a positive result is a good sign for the industry.
In the latest HPSI survey, homeowners in all UK regions perceived a rise in value. March 2016 saw a stronger increase than February and was the 36th consecutive month in which a positive perception was reported across the UK. In addition, all regions are confident of continued growth over the next 12 months.
The health of the housing market is not in doubt
The South East, London and the East of England felt the most strongly positive. Perceptions did not hit the same heights in the rest of the UK but were still roundly positive.
Homeowners across all regions England were quite correct to perceive an increase as the Office for National Statistics confirmed an overall 8.6% rise in values over the year to the end of January. Very strong growth of over 11.0% in London played a significant part in the national average. Other areas, such as the North East, did not fare nearly as well. The housing market in Wales actually decreased in value by 0.3% over the same time period.
The 8.6% overall rise is clearly significant but we cannot be sure if this represents a strong trend as of yet. It must be taken into consideration that the ONS statistics cover the whole of the previous year, but might not always be completely reflective of the state of play at this current moment in time.
In recent months, small signs have begun to appear that the London luxury property market might finally be saturated and that demand might not exist in the same way as it has been over the past years. For instance there has been much talk in the press about the mass development of high end property around Battersea Power Station and Nine Elms Lane running into a bit of trouble.
This is by no means a prediction that the London property bubble will burst (continuing growth is far more likely), but considering the recent uncertainty caused by fluctuating oil prices and the upcoming Referendum on EU membership, even a small relaxation in demand would be a significant sign that all was not well beneath the surface.
In other parts of the country, the health of the housing market is not in doubt.
Areas in the North of England continue to go from strength to strength as ever more money is being invested in the region and the national economy is slowly rebalanced away from the capital.
Leeds has the largest workforce outside of London and the fastest year-on-year jobs growth of any city in the UK. With city centre developments such as X1 Aire being constructed again and several very large housing developments planned in the next five years, Leeds is the place to be. It might not currently be as immediately well known as Manchester as an investment hot spot, but that is set to change very soon.
On the subject of Manchester, the market remains very strong indeed. There is something of a gap between the publicity grabbing headlines announcing new developments and the number of developments actually in construction, but the strong pipeline ensures the future market as well as the present. The increase in sales of flats in Manchester and Salford over the past two decades has been greater than anywhere else in the country.
One trend which remains unchanged in the face of people’s perceptions or the vagaries of the housing market is that there are not enough new homes being built and that renting continues to become the new normal. Above all else, the chronic under supply of new, affordable dwellings should ensure that the House Price Sentiment Index should remain positive for many months and years to come.