"Demand will be unleashed once there is a more permanent drop in mortgage rates and that requires fewer mixed signals around inflation and a rate cut to appear firmly on the horizon"
- Tom Bill - Knight Frank
UK house prices are up by 1.6% compared with a year ago, according to this morning's data released by Nationwide.
Despite a slight dip of 0.2% in average prices during March after taking account of seasonal effects, the annual rate of house price growth edged higher to 1.6%, up from 1.2% in February.
Non-seasonally adjusted average house prices climbed to £261,142, according to the lender.
Robert Gardner, Nationwide's Chief Economist, comments: “Activity has picked up from the weak levels prevailing towards the end of 2023 but remains relatively subdued by historic standards. For example, the number of mortgages approved for house purchases in January was around 15% below pre-pandemic levels.
"This largely reflects the impact of higher interest rates on affordability. While mortgage rates are below the peaks seen in mid-2023, they remain well above the lows prevailing in the wake of the pandemic
Cost of living pressures ease
“With cost-of-living pressures easing as inflation moves back towards target, consumer sentiment is improving. Indeed, surveyors report a pickup in new buyer enquiries and new instructions to sell in recent months. Moreover, with income growth continuing to outpace house price growth by a healthy margin, housing affordability is improving, albeit gradually.
“If these trends are maintained, activity is likely to gain momentum, though the pace of the recovery is still likely to be heavily influenced by the trajectory of interest rates.
All regions saw improvements in the annual rate of change during Q1
Robert Gardner continues: “Our regional house price indices are produced quarterly, with data for Q1 (the three months to March) indicating that while some regions recorded annual price declines, there was an improvement in the annual rate of change across all areas.
“Northern Ireland remained the best performing area, with prices up 4.6% compared with Q1 2023. The biggest improvement in terms of annual price growth was in the North, where annual price growth picked up to 4.1% in Q1 2024, making it the best-performing English region.
“Across England overall, prices were up 0.4% compared with Q1 2023, while Wales saw a 1.2% year-on-year rise. Meanwhile, Scotland saw annual price growth pick up to 3.7%.
“Across northern England (which comprises North, North West, Yorkshire & The Humber, East Midlands and West Midlands), prices were up 1.7% year on year.
“Meanwhile southern England (South West, Outer South East, Outer Metropolitan, London and East Anglia) saw a 0.3% year-on-year fall. London remained the best-performing southern region with annual price growth recovering to 1.6%. The South West was the weakest performing region, with prices down 1.7% year-on-year.”
Tom Bill, head of UK residential research at Knight Frank, said: “House prices have risen marginally but the direction of travel for the UK market has been sideways so far this year.
"Demand will be unleashed once there is a more permanent drop in mortgage rates and that requires fewer mixed signals around inflation and a rate cut to appear firmly on the horizon.
"While the outlook is more positive than six months ago, a wave of people rolling off sub-2% two-year mortgages from early 2022 is adding to the financial pressures in the system and transactions are still a fifth below the five-year average.
"Despite the challenges, including mounting political instability, there should be a recognisable seasonal bounce in activity this spring and we expect UK prices to rise by 3% this year as the market recovers from a subdued 2023.”
Foxtons CEO, Guy Gittins, says: "The UK property market has well and truly sprung into action in recent months and we’ve seen a notable uplift in the volume of sales enquiries, viewings requests and the number of offers being submitted. It’s fair to say that the green shoots of positivity seen since the closing stages of last year are blossoming and this is helping to cultivate positive house price growth.
"Higher mortgage rates do remain a concern for many buyers and will continue to influence the price they are able to pay to a degree. However, with interest rates expected to fall this year, market confidence is high and we’re continuing to see buyers move forward with their plans to purchase undeterred.”
Director of Benham and Reeves, Marc von Grundherr, commented: “As we approach the spring selling season a very marginal decline in the monthly rate of house price growth should be viewed as nothing more than the market pausing for breath before the floodgates open.
"The real measure of market health is the annual rate of growth and a 1.6% jump demonstrates that we are very much heading in the right direction and it’s full steam ahead for the remainder of the year.”
Nathan Emerson, CEO of Propertymark, comments: “Sellers have every reason to start feeling positive about putting their home up for sale and being able to go on to buy their next perfect property. 2024 has shown a positive trend that house prices are growing once again following three years of economic turbulence.
“However the UK Government must look to make houses equally affordable for buyers and that can only be done by building more houses. Propertymark’s own Housing Insight Report found there has been an 80 per cent increase in the number of new properties becoming available, ultimately making it easier for people to consider a move.”
Anna Clare Harper, CEO of sustainable investment adviser GreenResi, says: “With UK house prices increasing by 1.6 per cent annually in March, this is positive news for many, as upward movement in the housing market is generally seen as a good thing.
“However, the housing market is not one single market – it’s millions of tiny locations down to the street level, each becoming more or less popular over time, influenced by different factors ranging from local authority solvency to new local development schemes.
“Then there are factors affecting the pricing of individual properties, including the cost to own the property, partly related to its energy efficiency; cost to maintain the property; and affordability, which for younger people especially is determined by the cost and availability of finance.
“So, market pricing for March reflects the millions of individual negotiations balancing what one buyer wanted with what one seller needed, during that month. All of these factors and more are important when evaluating properties today and forecasting what will happen with prices tomorrow.”
