UK house prices saw a notable increase in March, with annual growth rising to 2.2% from 1% in February, according to Nationwide’s latest data. The average property value climbed to £277,186, reflecting a 0.9% rise month on month and signalling renewed momentum in the housing market after a slowdown earlier in the year.

Renewed Momentum in House Price Growth

Nationwide’s chief economist, Robert Gardner, highlighted that the recent pickup in house price growth suggests the market regained strength following the subdued activity around the turn of the year. However, he cautioned that the sharp rise in global energy prices, driven by developments in the Middle East, presents a significant economic shock that clouds the outlook for the housing market.

Gardner noted, “In the near term, UK economic growth is likely to be slower and inflation higher than previously expected, although ultimately the impact will depend on the duration of the shock as well as the policy response.” He emphasised the uncertainty surrounding interest rates, which will depend on how demand and supply sides of the economy are affected.

Housing Affordability Faces Challenges

The economist warned that if the current economic shocks persist, they could reverse some of the improvements in housing affordability seen in recent years. Rising energy costs and uncertain economic conditions are likely to dent consumer sentiment, which may lead to a softening in housing market activity.

Regional Variations in Price Growth

Nationwide’s quarterly data revealed that most UK regions experienced annual price growth, though gains were modest in several parts of England. Two regions, the outer South East and East Anglia, recorded annual declines of 0.7% and 0.4% respectively in the first quarter.

Growth remained below 1% in the West Midlands, East Midlands, and South West. Northern Ireland led the market with a robust 9.5% annual increase, followed by the North West at 3.3%. Scotland and Wales also saw solid growth, with prices rising 3.0% and 2.7% year-on-year respectively.

In England, annual growth slowed to 0.9% from 1.2% in the previous quarter. Northern regions, including the North, North West, Yorkshire and the Humber, East Midlands, and West Midlands, saw prices rise by 1.5% year-on-year, with the North West remaining the strongest English region.

Industry Perspectives on Market Trends

Mortgage expert Karen Noye of Quilter observed that the figures reflect early repricing in mortgage markets following the conflict in Iran. She suggested that while house prices have shown resilience for now, momentum is expected to ease as higher mortgage rates and economic uncertainty weigh on buyer confidence.

Propertymark CEO Nathan Emerson welcomed the uplift in house prices, interpreting it as a sign of resilient buyer demand despite economic headwinds. He attributed price growth to improved market sentiment and slightly better affordability conditions earlier in the year.

Tom Bill, head of UK residential research at Knight Frank, noted that the full impact of the Middle East conflict on the housing market is yet to be felt. He explained that mortgage offers lasting six months mean the effect of increased borrowing costs will become more apparent in spring and summer, likely placing downward pressure on prices and transaction volumes. Bill also pointed out that a mitigating factor is the significant equity held by homeowners, with more properties now owned outright than mortgaged.

Jason Tebb, president of OnTheMarket, highlighted that market activity and sentiment improved at the start of the year, with buyers and sellers proceeding with greater confidence. He added that although interest rate rises seem more probable than reductions, previous rate cuts have helped affordability and strengthened borrowers’ positions.

What this means for landlords

The recent rise in house prices and renewed market momentum may offer some reassurance to landlords regarding property values. However, the uncertain economic environment, particularly with inflationary pressures and potential interest rate fluctuations, suggests that landlords should remain cautious about future market conditions.

Higher mortgage rates and softer buyer demand could impact rental demand and property values in the medium term. Landlords may need to consider these factors when planning investments or managing rental portfolios, ensuring they remain adaptable to changing market dynamics.

Source: Based on reporting from Property118

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