Nationwide’s house price index for March showed that, compared to the previous month, values were up by 0.4%. This month-on-month growth was muted compared to February, when values rose by 0.9%.
Robert Gardner, Nationwide’s chief economist, said, despite the uncertainty caused by developments in the Middle East and subsequent rises in energy prices, “the UK housing market has continued to regain momentum following the slowdown recorded around the turn of the year”.
He said this was “somewhat surprising”, considering the GfK consumer confidence survey found households were not optimistic about their economic outlook or their finances.
“Measures of housing market sentiment have also deteriorated. The Royal Institution of Chartered Surveyors reported a sharp fall in new buyer enquiries in March, taking the index to its weakest reading since 2023. This softening is likely to have been influenced by higher market interest rates following the onset of the conflict, alongside a more uncertain backdrop,” he added.
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Gardner said the housing market was likely being supported by the strength of household finances.
He added: “In aggregate, household debt is at its lowest level relative to income for around two decades, and sizeable savings buffers have been built up in recent years, although these have not been evenly distributed across households.
“Moreover, housing affordability had been improving steadily in recent years due to a combination of income growth outpacing house price growth by a wide margin and a modest decline in mortgage rates.”
Gardner said: “While market interest rates have risen in recent months, the impact on affordability has so far been limited. Indeed, swap rates, which underpin fixed rate mortgage pricing, remain well below the highs reached in 2023 and are broadly in line with levels prevailing in late 2024, implying only a partial reversal of earlier gains.”
He said the UK economy and housing market had shown resilience, and if the shock passed relatively quickly, any near-term softening in the housing market would be short lived.
Determined movers
Amy Reynolds, head of sales at Richmond estate agency Antony Roberts, said the underlying need to move remained strong and demand for well-priced, high-quality homes was still present.
She added: “Buyers are not stretching to make offers they don’t believe will be accepted – they are simply choosing alternative properties.
“In certain price brackets, buyers have the luxury of choice and vendors need to be mindful of this. While the wider economic backdrop may temper the pace of growth, we are seeing a more price-sensitive market where realism and accurate positioning are key.”
Tom Bill, head of UK residential research at Knight Frank, said the impact of rising mortgage rates would be more gradual and offers would predate the effects of the conflict on transactions.
He added: “Borrowing costs have been volatile in recent weeks, underlining the high degree of uncertainty that exists over how long the war lasts, to what extent it escalates and the impact of second-round effects on inflation.”
Jeremy Leaf, North London estate agent and a former Royal Institution of Chartered Surveyors (RICS) residential chair, said to “write the housing market off at your peril”, adding that prices were holding up better than hoped.
Leaf added: “Although the data covers the period up to the first month of the war in Iran, perhaps before it became apparent hostilities would become more protracted, we are finding on the ground realism is starting to prevail.
“Buyers and sellers are negotiating hard, but the overwhelming majority of transactions are continuing. On the other hand, the volume of property on the market means it’s taking longer to secure commitment and [is] likely to continue that way for several months yet.”
