Monday, 5 December 2011

Public refuses to believe that house prices have gone down

Consumers have given a decisive clue as to why asking prices have been slow to register any decline – most simply do not believe that house prices will go down.

Indeed, more than one in five confidently expect them to go up.

Whilst Rightmove has finally reported a dip (of 3.1%) in asking prices within the last month, asking prices have still held up remarkably well. They are 1.2% up on a year ago, and at £232,144 are some £70,000 ahead of ‘actual’ prices reported by the Land Registry.

But while agents have been in the firing line for alleged over-pricing, a new survey –ironically by Rightmove, which frequently tears its hair out over the issue – goes some way towards solving the mystery of the reality gap.

The massive poll, of over 26,300 consumers, shows that two-thirds (63%) do not believe house prices will be lower in a year’s time than they are now. They expect them to remain the same or, according to 22%, to be higher.

Less than one-third (three in ten) expect lower prices – unchanged from a year ago.

Despite ongoing economic gloom, the optimism among consumers is almost universal. While Londoners are the most optimistic, with 29% of consumers expecting higher house prices in 12 months’ time, in Wales – the most pessimistic regions – only 35% are predicting price drops over the coming year.

A baffled-sounding Miles Shipside, director of Rightmove, said: “The public’s belief in the value of bricks and mortar seems to defy the deteriorating economic situation. This is a clear message that the majority of consumers view the property asset class to be as ‘safe as houses’ in these times of economic uncertainty.”

He added: “It should be remembered that in spite of the overall confidence expressed in this survey for property prices, transactions volumes are still well down on historic norms. Economic stability in the UK and Eurozone will be needed before many are willing or able to re-engage with the property market.”

The survey did, however, reveal some extremely localised opinions.

For example, in the North-West 26% of respondents in Preston expect prices to be higher in 12 months’ time, compared with just 14% in Lancaster only 20 miles away.

Shipside said: “Local variations highlight how patchy confidence can be, depending on an area’s housing mix and wealth demographics.

“The wealthier middle-to-upper price brackets may be feeling fairly blast-proof from any further economic eruptions, and see a less turbulent outlook.

“Meanwhile, some of the more cash-strapped terrace and semi dwellers may feel far more exposed to the negative pressures of reduced mortgage availability and job uncertainty.”

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