According to Halifax’s latest House Price Index, this is the weakest rate of annual growth in three and a half years and down on the peak of plus 12.5 per cent in June 2022.
Monthly average house price growth came to 0.8 per cent in March, compared to a 1.2 per cent rise in February, showing “resilience” in the housing market.
Average property price up
The report said that the average UK property costs £287,880, which is up from £285,660 in February. This is around two per cent below the peak reached last August.
Northern Ireland reported the strongest annual house price growth at 4.9 per cent, with the average house price coming to £186,459. This was followed by the West Midlands at 3.8 per cent with properties reaching £248,308.
Wales’ annual house price growth was pegged at one per cent, with average property price coming to £213,950, while in Scotland the annual price growth figure came to 2.3 per cent and the average property price was £199,853.
Greater London had the lowest annual growth at 0.1 per cent, with the average now £537,250.
Housing market showing ‘resilience’
Kim Kinnaird, director of Halifax Mortgages, said that the UK housing market “continues to show resilience following the sharp downturn at the end of 2022”.
She continued that overall these figures “suggest relative stability in the housing market” at the start of the year.
“This has been characterised by a partial recovery in activity and transactions, especially when compared to the significant drops seen at the end of last year, with latest Bank of England data showing mortgage approvals rising for the first time in six months,” Kinnaird added.
She noted that the main factor behind the improved picture was an easing in mortgage rates, with the spikes of November and December “largely reversed”.
Kinnaird said that while mortgage rates are higher than they have been over the last decade a typical two-year fixed rate is down by more than 100 basis points over the last few months.
She added that the labour market was strong with unemployment at a historical low of 3.7 per cent.
“Predicting exactly where house prices go next is more difficult. While the increased cost of living continues to put significant pressure on personal finances, the likely drop in energy prices – and inflation more generally – in the coming months should offer a little more headroom in household budgets.
“While the path for interest rates is uncertain, mortgage costs are unlikely to get significantly cheaper in the short term and the performance of the housing market will continue to reflect these new norms of higher borrowing costs and lower demand. Therefore, we still expect to see a continued slowdown through this year,” Kinnaird explained.
‘There’s more confidence out there than many may think’
Mark Harris, chief executive of mortgage broker SPF Private Clients, said that annual house price growth had stayed “remarkably consistent” as the market gradually returned to pre-pandemic levels.
He added: “Lenders continue to jockey for position and business with a number reducing the pricing of their cheapest five-year fixes. Even if there is another base rate rise to come, there is a growing expectation that rates are close to their peak and if inflation falls significantly, as forecast, the outlook will be much more encouraging for borrowers.”
James Briggs, head of personal finance intermediary sales at Together, said the figures showed a “slight rebound after months of subdued activity”.
He continued: “With consumer confidence remaining weak, and high inflation continuing to weigh heavily on people’s ability to buy or save enough for adequate deposits, there may be a few months yet until we see any real momentum.”
However, he said that not all activity had “ground to a halt”, with opportunities for first-time buyers still present, especially through schemes like shared ownership and family mortgages growing in popularity.
Nick Harris, co-founder at Wokingham-based Quarters Residential Estate Agents, agreed that demand had been steadily increasing in the first three months of the year, especially in March.
“There’s more confidence out there than many think. This shows that while discretionary buyers are sitting tight, the serious buyers remain active. Sellers are being much more realistic on price and are typically also buyers so they appreciate a more balanced property market.
“Locally, we don’t expect to see the often reported ‘crash’ but can certainly see that a correction of circa five per cent is realistic. It’s no secret the market is currently favouring buyers,” he noted.
Disagreement about house price trajectory for the year
Chris Barry, director at Gloucester-based conveyancer, Thomas Legal said that house prices should remain “fairly steady” throughout 2023.
He noted that demand had dropped after the mini Budget but as the latest base rate increase looked to be the last for a while, confidence had grown.
“Recently, many buyers have come back to the market, something evidenced by the recent increase in mortgage approvals. Demand is continuing to grow as confidence and economic stability improve, which may see supply and demand meet in the middle sometime this year, creating the perfect housing market,” he noted.
Barry said that the new build sector had “pushed on quickly this year”, which he thought was due to a short freeze in building projects due to economic uncertainty in October and then a sharp rise in new builds coming to the market and an increase in demand. He added that developers were also offering a large incentives to buyers.
Graham Cox, founder of the Bristol-based broker, SelfEmployedMortgageHub.com, disagreed adding that he expected a “steep decline in house prices this year and well into next”.
“Mortgage approvals are down over 40 per cent in the past few months, inflation continues to erode living standards and interest rates are still on their upward trajectory. Over the next six months, I believe we’ll see very sharp falls in house prices of one to two per cent a month.
“The trigger will be the traditional springtime rush to list property for sale. Demand simply won’t match it, as prices are far too high given where mortgage rates are,” he noted.
