The latest data and analysis from Nationwide this morning has revealed that, during March, average house prices were down slightly by 0.2% when compared to the previous month, after taking account of seasonal factors.
The lender suggests that while policy support is likely to boost the housing market over the next six months, the longer-term outlook remains highly uncertain.
The North West was the strongest performing region, with prices up 8.2% year-on-year - the strongest price growth seen in the region since 2005 with average prices reaching a record high of £181,999. There was also a further pick up in price growth in the neighbouring North, which saw a 7.2% annual increase.
Average house prices now stand at £232,134.
Robert Gardner, Nationwide's Chief Economist, comments: “Annual house price growth slowed to 5.7% in March, from 6.9% in February. Prices fell by 0.2% month-on-month, after taking account of seasonal effects, following a 0.7% rise in February.
“Given that the wider economy and the labour market has performed better than expected in recent months, the slowdown in March probably reflects a softening of demand ahead of the original end of the stamp duty holiday before the Chancellor announced the extension in the Budget.
“Recent signs of economic resilience and the stimulus measures announced in the Budget, including the extension of the furlough scheme and the stamp duty holiday, as well as the introduction of a mortgage guarantee scheme, suggest that housing market activity is likely to remain buoyant over the next six months.
“The longer-term outlook remains highly uncertain. It may be that the recovery continues to gather momentum and that shifts in housing demand resulting from the pandemic continue to lift the market. However, if the labour market weakens towards the end of the year as policy support is withdrawn, as most analysts expect, then activity is likely to slow nearer the end of 2021, perhaps sharply.
Anna Clare Harper, chief executive of asset manager SPI Capital, says: "Annual house price growth rose by 5.7% in the year to March, down from 6.9% in February. This was led by exceptional growth in the Northwest of 8.2%, which reflected strong fundamentals in this market: demand is high from investors and home buyers alike.
"This slight slowdown reflects the originally proposed end to the temporary stamp duty reduction and practical restrictions: Christmas, then lockdown, which reduced people’s ability to transact. Yet people want to buy while stamp duty is reduced.
"Stamp duty has a more than proportionate impact on transactions because affordability is heavily influenced by mortgage lending. Investors and homebuyers can borrow against the property price, but they cannot use finance to fund transaction costs.
"Reduced stamp duty has not been the only driver of house price growth over the last year. We also have cheap debt as a result of very low-interest rates, which give buyers a ‘discount’; the release of pent up supply and demand and desire to improve surroundings amongst existing homeowners; and the ‘flight to safety’, since in times of uncertainty, people want to put their money in a stable asset with low volatility. These trends are likely to hold up throughout 2021.
"Looking to the future, the extension and tapering down of the temporary stamp duty reduction is likely to boost the housing market in terms of transactions and pricing. This is positive news for the housing market and for existing property owners, as house price growth both reflects and boosts confidence.
"However, there are concerns in the market about widening inequalities: house price growth makes it even harder for first-time buyers to get on the property ladder. For this reason, the slight slowdown in house prices showing in Nationwide’s latest data can be seen as a very positive thing, both in terms of stability of asset values and first-time buyer affordability."
