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Confidence in property prices collapses, says Prudential

Amanda Jarvis

December 21, 2004

The index shows those expecting a drop in house prices has trebled and redundancy worries almost a third of Londoners.

Homeowners’ confidence in the value of their homes has plummeted amongst speculation of a full-scale property market crash, the research from Prudential’s tri-annual Mood of the Nation Index.

Only 30 per cent of homeowners expect the value of their home to increase over the next 12 months, compared to 61 per cent in March. More worryingly, the number of homeowners forecasting a fall in the value of their home over the coming year has almost trebled from 6% in March to 17% now. This drop in confidence is consistent across all regions of the country.

London has experienced one of the biggest drops in confidence over the last eight months. Only 21% of London homeowners expect the value of their homes to rise next year — a mere one-third of the 63% who said the same in March. Similar confidence crises can be seen in the South West, South East and the North West where just 20% of homeowners expect their house price to go up compared to 63% who thought so in March.

Plunging confidence in the housing market has affected the nation’s overall financial mood. The Pru Mood of the Nation Index — which provides a litmus test of national financial confidence every month – shows an almost eight point dip to 122.3 from its August 2004 high of 130.

Fear of redundancy is another mood dampener with one in five Brits worried about losing their jobs. On a regional basis, Londoners are the most worried at 32%, compared to 17% of people in the Midlands and 17% in the South.

Angus Maciver, director of research at Prudential UK, said: “The predicted slowdown of house prices and even events such as the run down to the US election have dented financial optimism for the year ahead.

“There is undoubtedly a growing nervousness about the housing market. Some people, wisely I think, are starting to realise that they can reduce risk by having a spread of investments rather than tying all their money up in their house.”

Despite the gloom, one bright spot is that people seem more optimistic about paying off their debts. Almost one in five of us expect our borrowings to decrease next year compared to just 15% in July.

Younger age-groups are the most optimistic about their personal economic situation with over a third (36%) of 16-24 year-olds expecting it to improve in the next year, compared to just 7% of adults aged 55-and-over.


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