Greater London and the North East are the only UK regions to have avoided a slowdown in annual house price growth in March, according to new figures from Halifax.
The average cost of a home in the capital is now £537,250 which is very slightly up (0.1 per cent) on this time last year.
London house price growth has been trailing the rest of the country since the pandemic race for space as buyers seek out more affordable regions.
Across the UK, house price growth slowed to its weakest level for more than three years. The average cost of a UK home is now £287,880 after growth of 1.6 per cent in the year to March.
The recent easing of mortgage rates has helped to support the property market, according to Halifax.
Kim Kinnaird, director, Halifax Mortgages, said: “The typical [UK] house price is now £287,880, about two per cent below the peak reached last August.
“On an annual basis, house prices were 1.6 per cent higher than a year ago, slowing from 2.1 per cent in February.
Overall these latest figures continue to suggest relative stability in the housing market at the start of 2023
“This is the weakest rate of annual growth in nearly three and a half years (October 2019), having fallen markedly since June 2022’s peak of 12.5 per cent.
“However, overall these latest figures continue to suggest relative stability in the housing market at the start of 2023 and align with many other recent industry surveys and data.”
Ms Kinnaird added: “The principal factor behind this improved picture has been an easing of mortgage rates.
“The sudden spike in borrowing costs that we saw in November and December has now been largely reversed.
“It’s also important to recognise that the labour market, a key indicator for house prices, remains strong, with unemployment at a historical low of 3.7 per cent, and pay growth continues to look robust.
“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.”
Fixed mortgage rates may continue to edge down
Halifax’s latest findings contrast with a separate house price index released by Nationwide Building Society last week.
According to Nationwide’s calculations, house prices fell by 0.8 per cent month on month in March, marking the seventh month of price falls in a row.
Halifax’s report is based on mortgage approval data, reflecting prices agreed between buyers and sellers prior to sales completing. Its data includes Halifax, Lloyds Bank and Bank of Scotland mortgage customers.
Martin Beck, chief economic adviser to the EY ITEM Club, said: “The divergence between the two measures complicates a reading of the housing market.
“Taking the Halifax measure in isolation, there are reasons why prices may be holding up better than expected. A rise in mortgage approvals in February and better survey data on transactions of late suggests that weakness in housing market activity may have bottomed out.”
He added: “On the other hand, the resilience in prices shown in today’s data may prove fleeting and the EY ITEM Club still expects property prices to drift down this year and into 2024. House prices remain very high on most measures of affordability.”
Alice Haine, personal finance analyst at Bestinvest, said: “While variable rate mortgages have increased as they are directly tied to the Bank of England’s headline interest rate, fixed mortgage rates may continue to edge down thanks to a brightening outlook for swap rates – the rate banks borrow money at – which are based on future bank rate expectations, and lenders competing more aggressively for business.
“The challenge from here is whether the full drag on house-buying activity from the cycle of rate rises is yet to be fully felt and whether the recent concerns for the global banking system cause banks to tighten their lending criteria.”
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “Annual price rises at their lowest in three and a half years will keep a lid on enthusiasm, and sticky inflation could prove its undoing, but there’s an air of hope that the correction may not be as painful as had been feared.”
Tom Bill, head of UK residential research at estate agent Knight Frank, said: “Prices are broadly in a holding pattern but will be tested this spring as supply rises and higher mortgage rates cause a sharp intake of breath among a growing number of buyers and homeowners.
“We expect prices to fall by a few percent this year as the transition to the new normal for borrowing costs takes place.”
Jeremy Leaf, a north London estate agent, said: “At the sharp end, sales are still being agreed but are taking longer, not least because there’s more choice of stock.
“Looking forward, we don’t expect to see a dramatic change as we enter the key spring period for the housing market.”
There is a growing expectation that rates are close to their peak
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “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 (Bank of England) 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.”
Jason Tebb, chief executive of property search website OnTheMarket.com, said: “Average property prices held steady in March, further evidence of the housing market continuing to rebalance in a calm, measured way.
“Our own data supports this, with improvements in both buyer and seller sentiment as the market enters the traditionally busier spring period.”
Nathan Emerson, chief executive of estate agents’ body Propertymark, said: “Prices have adjusted to rising interest rates, curbing affordability, but as we head into April and May, prices may pick up as more buyers will be on the move.”
Iain McKenzie, chief executive of the Guild of Property Professionals, said: “The picture is still mixed as these figures show a brighter prospect for sellers than some other measures of house prices.”
Jonathan Hopper, chief executive of Garrington Property Finders, said: “For a property market that has been battered by months of weak data and gloomy predictions, today’s surprisingly upbeat snapshot from the Halifax is as welcome as the spring bank holiday.”
Nick Harris, co-founder at Wokingham-based Quarters Residential Estate Agents, said: “There’s more confidence out there than many think.”
UK house prices
Region |
Average house prices (March 2023) |
Annual growth |
East Midlands |
£238,997 |
2.0% |
Eastern England |
£332,760 |
0.4% |
London |
£537,250 |
0.1% |
North East |
£167,354 |
2.6% |
North West |
£223,078 |
3.5% |
Northern Ireland |
£186,459 |
4.9% |
Scotland |
£199,853 |
2.3% |
South East |
£387,972 |
0.5% |
South West |
£302,095 |
1.1% |
Wales |
£213,959 |
1.0% |
West Midlands |
£248,308 |
3.8% |
Yorkshire and Humber |
£202,757 |
3.6% |
