Slight Slowdown in House Price Growth in March
Nationwide’s latest house price index indicates a small slowdown in annual house price growth for March, reflecting a temporary drop in demand in the run-up to the original stamp duty holiday deadline. Annual house price growth was 6.9% in February, slowing slightly to 5.7% in March.
Northern Ireland was the strongest performer in the UK throughout the first months of the year, achieving annual house price growth of 7.4%. Scotland and Wales saw a growth of 6.9% and 7.2% respectively, followed by England with Q1 annual price growth of 6.4%. This is down slightly from the 6.9% recorded in Q4 2020, which came as little surprise to the vast majority of market watchers.
The figures from Nationwide also highlighted a series of regional disparities, with the Northwest having achieved the strongest annual house price growth of 8.2%. As predicted by many, London’s performance was the poorest of all in the regional rankings with annual price growth falling from 6.2% in Q4 2020 to 4.8% in Q1 this year.
A Buoyant Six Months Ahead
Commenting on the figures, Nationwide’s chief economist said that the slowdown was to be expected and that the sector is anticipating a strong spring and summer season.
“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,” Robert Gardner said.
“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 However, if the labour market weakens towards the end of the year as policy support is withdrawn, as most analysts expect, then activity is likely to slow nearer the end of 2021, perhaps sharply.”
His sentiments were echoed by SPI Capital chief executive Anna Clare Harper, who suggested that many current homebuying trends are likely to perpetuate throughout the year.
“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,” Ms Harper said.
“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.”