The average price of a UK home edged up by 0.2% in April, according to the UK’s biggest building society, despite expectations that a busy start to the year would be followed by a sharp drop in demand.
Nationwide said the average price paid for a property during the month had risen to a new high of £202,436, after breaking through the £200,000 barrier in March.
The monthly rise was the lowest since November and brought the year-on-year rate of increase down to 4.9%, from 5.7% in March. The figures are based on mortgages approved and valued by the society during the month, adjusted to reflect the price of a “typical” home.
Lenders and estate agents all reported an increase in interest from buyers in the early part of 2016, as those looking for buy-to-let properties and other second homes tried to beat a change to stamp duty on 1 April. Since that date all property purchases other than a main home have attracted a three percentage point surcharge.
Figures from HMRC showed that 165,000 transactions were registered during March – more than double the figure for the same month of 2015. Many commentators are predicting a drop in demand following the rush, and price falls in some parts of the country.
Nationwide’s chief economist, Robert Gardner, said: “This slowdown returns the annual pace of house price growth to the fairly narrow range between 3% and 5% that had been prevailing since the summer of 2015.
But while Gardner said house purchase activity was likely to fall in the coming months, particularly as buy-to-let lenders face another set of new tax rules in April 2017, other factors could drive prices up.
“It is possible that the recent pattern of strong employment growth, rising real earnings, low borrowing costs and constrained supply will tilt the demand/supply balance in favour of sellers and exert upward pressure on price growth once again in the quarters ahead,” he said.Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the month-on-month increase was “a strong result, given that the hike in stamp duty for buy-to-let and second home purchases kicked in at the start of the month”.
He added: “All of the other measures of house prices have been significantly stronger over the last six months than Nationwide’s index, which is based on its mortgage offers and so may suffer from sampling issues.
“We expect the Nationwide index to pick up at a faster rate over the coming months as falling mortgage rates, loosening credit constraints and rising wage growth bolster demand, while supply remains constrained.”
Separate figures from the Land Registry showed a 0.5% dip in prices in England and Wales in March, putting the average price at £189,901. The data, which is based on sales registered during the month and does not include new-build properties, showed an annual increase of 6.7%.
Prices were down month-on-month in all regions except London and the south-east of England, the Land Registry said, with the biggest fall in Yorkshire & the Humber, which recorded a 2.6% drop.
In London, prices were up by 13.9% over 12 months, to an average £534,785 – five and a half times the average price of a home in the north-east, which fell by 0.7% over the year to £97,581.
Jonathan Hopper, managing director of buying agents Garrington Property Finders, said March’s dip in prices was “likely to presage a return to more normal rates of price growth rather than a serious slowdown in the market”.
He said: “Even though its annual level of price growth remains close to 14%, London’s extraordinary run of price rises has slowed dramatically as international buyers hold off on purchases until the Brexit uncertainty is past.
“Elsewhere, levels of buyer confidence remain solid, but with the surge in purchases by buy-to-let buyers now over, sellers now need to think more carefully about pricing competitively,” said Hopper.
Howard Archer, chief UK economist at IHS Global Insight, said over the next few months the market would be affected by the EU referendum.
“We expect housing market activity to regain limited momentum in the second half of 2016, on the assumption that a vote to stay in the EU reduces uncertainty and supports a pickup in economic activity,” he said.
“A vote to leave the EU would be liable to see a marked hit to UK economic activity over the rest of this year and in 2017 amid heightened uncertainties, which would likely weigh down heavily on the housing market.”