The study found 78% of people believe house prices will continue to rise, compared to 84% in December before the most recent interest rate rise and 81% in January.
Warren Bright, chief executive officer of Propertyfinder.com, commented: “Recent government data indicated annual house price inflation was falling just short of 10% in December, but this is looking at the market in the rear view mirror. Other recent data on lending and prices suggest the current the current trend is already slowing. Our research indicates that whilst the rate hikes in the second half of 2006 had a slight dampening effect on the market, the shock January rise has made a much bigger impact.”
Buyers are less optimistic than sellers
Demand for homes continues to outstrip supply. There is currently an average of three buyers for every house on the market in the UK. On average buyers are still having to offer 1.5% above the asking price in order to secure their home. However, buyer confidence on the outlook for prices is far lower than that of sellers, a warning sign that the market is set to slow.
Bright continued: “Sellers expect house prices to rise by 2% more than buyers, largely because they are experiencing high offers on their properties. However, they may have overblown expectations. Past experience has taught us that buyer confidence dipping significantly below that of sellers precedes a decline in the number of transactions taking place in the market. We may see the same happen in 2007.”
Interest rates are the major influencing factor but reduced inflation levels could offer relief
85% of respondents believe that any future cooling in the market would be attributable to further interest rate rises. This is compared to 76% in January, and 65% in December. 56% also believe that household debt would be a major influencing factor should house prices fall.
However, Britain's inflation rate eased slightly in January after jumping to an 11-year high in the previous month. The Consumer Price Index dropped to 2.7% from 3%, according to the Office for National Statistics. This is good news for the housing market. Inflation has fallen more rapidly than expected, prompting the possibility that interest rates may not need to rise much further. This would come as a welcome relief to the housing market and could serve to reaffirm consumer confidence.
Bright continued: “The succession of rate rises since last August has obviously been playing on the minds of home buyers. People’s confidence in the housing market has waned considerably in recent months. The latest inflation figures suggest the Bank of England is out of hot water and can afford to refrain from further action in the immediate future. If they do, the housing market has a better chance of slowing in an orderly fashion.”
