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Consumer Confidence Falls, but House Prices Rise

There has a been a slight deterioration of consumer confidence in the housing market, caused by short-term uncertainty from the General Election result, according to the Building Societies Association (BSA).

Younger Generation are the Least Confident

The BSA’s Property Tracker found that just 21% of consumers believe that now is a good time to buy, down from 29% in March this year. Nearly a third of consumers (30%) disagree that now is a good time to buy a home, the highest figure since December 2008 (37%) and up from 24% in March.

Perhaps unsurprisingly, it is the younger generation (18-24), that are the least confident about buying now, with only 16% believing that now is a good time to buy. A larger proportion (44%) of this age group believes that house prices will continue to rise over the next 12 months, compared to 37% across all ages. This makes it harder for them to raise a deposit and afford a home of their own.

Across all age groups, raising a deposit continues to be perceived as the single biggest barrier to home ownership, with 67% of consumers saying it would be one of the top three barriers stopping someone from buying their own home.

Underlying Economic Conditions

“Care is always needed in interpreting consumer views in the aftermath of a political event like the General Election, particularly when the result is unexpected,” explained Paul Broadhead, Head of Mortgage Policy at the BSA.  “We saw a similar fall in consumer confidence after the Referendum in June last year.  However, by September 2016 confidence had largely bounced back.”

“Whilst the political effect may be short term, some of the underlying economic fundamentals are becoming more of a challenge,” he added. “Over the past year, annual CPI inflation has picked up, reaching 2.9% in May, whilst the latest earnings figures for April show that wages grew by just 1.7% in the year. This means that consumers need to spend more just to maintain their current standard of living, a significant extra pressure for those who are saving for a deposit.  Mortgage rates, however, remain at historic lows and the market is highly competitive for those who do choose to purchase, whether for the first time or to move up the market.”  

Monthly Price Rise

Despite this fall in confidence, average house prices rose in June, according to the latest House Price Index from Nationwide.

It found that prices rose 1.1% month-on-month in June, reversing the previous three months’ falls, and annual house price growth rose to 3.1%. In addition, the Index revealed that the gap in house price growth between strongest and weakest performing regions in Q2 is the smallest on record.

“At this point it is unclear whether the increase in house price growth in June reflects strengthening demand conditions on the back of healthy gains in employment and continued low mortgage rates, or whether the lack of homes on the market is the more important factor,” commented, Robert Gardner, Nationwide's Chief Economist. “While survey data suggests that new buyer enquiries have softened, it also indicates that this has been matched by a decline in new instructions. Indeed, the number of properties on estate agents’ books remains close to all-time lows.” 

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