UK house price growth ‘grinding to a halt’ after rising in March
UK house prices rose in March but the market is now "grinding to a halt" due to the coronavirus and government measures to slow its spread, according to a survey released by Nationwide on Thursday.
Prices pushed up 3% on the year following a 2.3% rise in February and beating expectations for a 2% increase. This marked the fastest pace since January 2018, when annual growth was 3.2%.
On the month, prices were up 0.8% compared to 0.3% growth in February and versus expectations of a 0.1% decline.
Nationwide noted that while it uses a full month’s worth of data to generate the index, the cut-off point is slightly before the end of the month, meaning that the government lockdown is not reflected in the figures.
Nationwide’s chief economist, Robert Gardner, said: "In the opening months of 2020, before the pandemic struck the UK, the housing market had been steadily gathering momentum. Activity levels and price growth were edging up thanks to continued robust labour market conditions, low borrowing costs and a more stable political backdrop following the general election.
"But housing market activity is now grinding to a halt as a result of the measures implemented to control the spread of the virus, and where the government has recommended not entering into housing transactions during this period. Indeed, a lack of transactions will make gauging house price trends difficult in the coming months."
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said this was more evidence of a strong pre-virus recovery.
"The housing market had considerable momentum before Covid-19, but now will grind to a halt," he said.
"The government has recommended that people do not enter into housing transactions during the lockdown, and the majority of surveyors will not enter other peoples’ homes, making it virtually impossible to obtain a mortgage with a LTV ratio above 60%. So far, mortgage rates have fallen only marginally in response to the MPC’s actions; data from Moneyfacts show that lenders’ average Standard Variable Rate was a mere 6bp lower at the end of March than just before the MPC’s first rate cut.
"Over the same period, two-year and five-year fixed rates have dropped by just 4bp and 3bp, respectively. These modest declines won’t suffice to stabilise demand. The supply of homes on the market, however, likely will contract too.
"Forced sales should remain rare; lenders are automatically granting struggling borrowers a three-month payment holiday, while the government’s Coronavirus Job Retention Scheme should help to keep a lid on unemployment. House prices surely will dip over the coming months, but a complete recovery by the end of the year still is possible, if restrictions on the economy are lifted by the summer."