Nationwide reports house price rise in March but warns of impact of Middle East conflict
UK annual house price growth increased to 2.2% in March, up from 1% in February, according to the latest House Price Index from Nationwide.
The building society also reported a 0.9% increase in house prices month-on-month, after taking account of seasonal effects. As a result, the average house price now stands at £277,186, up from £273,176 the previous month.
However, despite the increase, Nationwide warns that the ongoing Iran war and knock-on effect on the UK’s economy could have a negative impact on the UK housing market in the coming months.
Commenting on the figures, Robert Gardner, Nationwide’s chief economist, said: “The pickup in house price growth suggests that the market had regained momentum after the slowdown recorded around the turn of the year. However, the sharp rise in global energy prices in response to developments in the Middle East represents a significant shock to the global economy, clouding the outlook.”
“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. The outlook for interest rates is particularly uncertain and dependent on whether the demand or supply side of the economy is more adversely affected.”
“Nevertheless, financial market expectations for the future path of Bank Rate have shifted dramatically. Towards the end of March, three interest rate increases were priced in over the next twelve months, compared to two rate cuts being anticipated before the strikes on Iran. This shift has resulted in a sharp rise in longer-term interest rates (swap rates) that underpin fixed-rate mortgage pricing.
“If sustained, this could reverse some of the improvement in housing affordability that has taken place in recent years. With consumer sentiment also likely to be dented by the uncertain outlook and the prospect of rising energy costs, housing market activity is likely to soften.”
On a regional level, most parts of the country saw modest annual house price growth for Q1, while two of the 13 regions saw annual declines. The Outer South East recorded a 0.7% drop and East Anglia saw a fall of 0.4% year-on-year. The West Midlands, East Midlands and the South West all recorded annual growth of less than 1%.
At the other end of the spectrum, Northern Ireland continued to outpace the rest of the UK by a wide margin, with prices increasing by 9.5% over the year. This was more than six times faster than the 1.5% recorded in the UK as a whole (in Q1) and nearly three times higher than the 3.3% recorded in the next strongest region, the North West.
Nationwide’s report highlighted a notable performance between the north and south, with Northern England house prices up 1.5% year-on-year, while Southern England remained steady at 0.6%.
London was the strongest southern region, with an annual rise of 1.7%, up from 0.7% the previous quarter.
Nationwide’s report also looked at the performance of different house types, with detached properties seeing the biggest percentage rise over the last year with average prices up 2.4%.
Terraced properties saw similar growth of 2.1%, with semi-detached slightly weaker at 1.5%. However, flats saw a small year-on-year decline of 0.5%.
Source: Showhouse
