Nationwide has published its house price index for March, with the building society’s Chief Economist saying the property market has remained ‘relatively subdued’ by historic standards.
House prices have bounced back after a 0.2% drop last month, totalling a 1.6% rise in the last year – making the new average property price £261,142.
All regions saw an improvement, with the highest rise in Northern Ireland, at 4.6%. The South West saw the largest drop, of 1.7%. However, demand for Super prime and prime London properties have seen a drop in the last quarter.
Commenting on the figures, Robert Gardner, Nationwide’s Chief Economist, said:
“UK house prices fell by 0.2% in March, after taking account of seasonal effects. Nevertheless, the annual rate of house price growth edged higher to 1.6% in March, from 1.2% in February.
“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 purchase 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.”
The lack of movement has been attributed to ‘unyielding mortgage rates’, but there is still buyer enthusiasm animating the market, with Zoopla figures showing that last week sales increased by nine per cent. Sarah Coles, who is head of personal finance at Hargreaves Lansdown has commented on Nationwide’s figures, pointing out that mortgage rates are still on the rise and approvals are 15% lower than before the global pandemic.
She claims that the ‘seize of security deposit is key’ and it’s ‘worth considering a lifetime ISA. The Spring Budget saw the government announce the introduction of the new UK ISA. with a £5,000 allowance, in addition to the existing ISA allowance, will provide a new tax-free savings opportunity.
Coles said:
“The property market has a slight spring in its step, but it’s being weighed down by higher prices and unyielding mortgage rates, which meant house prices eased off in March.
“Much of the monthly fall is due to the seasonal adjustment rather than buyers driving a hard bargain.
“However, we’re still a long way from the kind of bounce sellers were hoping for in the spring. Mortgage approval levels are still around 15% lower than before the pandemic. When you consider how many new For Sale signs have been going up around the country, it means sellers may still struggle to shift their properties. Zoopla figures out last week showed that the stock of properties is up by a fifth, and they’re accepting an average discount of £10,000.
“Meanwhile, mortgage rates are still rising. According to Moneyfacts, at the end of February, the average 2-year rate was 5.75% and by the end of March it was 5.8%. This is hardly a spectacular ascent, but means anyone who was waiting for better rates to emerge will still be sitting on their hands. At the same time higher house prices will mean that some buyers are stuck. Even with all the enthusiasm in the world a lack of affordability is squeezing them out of the market.
“In this environment, the size of your property deposit is key. If you’re saving for a new home, and news of rising prices makes it feel even more remote, it’s worth considering the Lifetime ISA. You can save up to £4,000 a year and the government will bump it up by 25% – or as much as £1,000. It’s a welcome leg up in a market where rising prices means you need all the help you can get.”
Iain McKenzie, CEO of the Guild of Property Professionals says there is an atmosphere of ‘cautious optimism’ that the industry will have an increase in activity and that professionals shouldn’t be surprised if buyers expect ‘flexibility on pricing’ during sale negotiations.
McKenzie said:
“The year is now in full swing, and so too is the property market. While there has been a slight fall in house prices compared to last month, we are now seeing a return to healthy levels on an annual basis, which will be welcome news to sellers.
“There is cautious optimism that the industry will see more activity this year, following the latest property sales data which showed a month-on-month rise. The outlook is still positive as we enter the spring, which is usually a busy season for estate agents.
“Buyers are well-informed of their advantageous negotiating position, so don’t be surprised if they expect some flexibility on pricing.
“However, as prices stabilise and even grow in some parts of the country, we expect to see the demand grow too, especially with more attractive mortgage products now being offered.”
