UK house price growth sharper than expected in March - Nationwide

UK house price growth accelerated more than expected in March, but the conflict in the Middle East has clouded the outlook for the sector, according to a report published on Tuesday.

Nationwide’s UK house price index showed growth picked up to 2.2% year-on-year in March from 1.0% in February.

Seasonally adjusted monthly price growth accelerated to 0.9% in March from 0.3% in February, and was ahead of the FXStreet-cited consensus for 0.6% growth.

This left the average UK house price at £277,186 in March, up from £273,176 in February.

‘The pickup in house price growth suggests that the market had regained momentum after the slowdown recorded around the turn of the year. However, the sharp rise in global energy prices in response to developments in the Middle East represents a significant shock to the global economy, clouding the outlook,’ said Nationwide Chief Economist Robert Gardner.

‘In the near term, UK economic growth is likely to be slower and inflation higher than previously expected, although ultimately the impact will depend on the duration of the shock as well as the policy response. The outlook for interest rates is particularly uncertain and dependent on whether the demand or supply side of the economy is more adversely affected.’

Gardner noted that financial market expectations for the future path of UK interest rates have ‘shifted dramatically’. Recently, three interest rate increases were priced in over the next 12 months, compared to two cuts being expected before the conflict began a month ago.

‘This shift has resulted in a sharp rise in longer term interest rates that underpin fixed rate mortgage pricing,’ Gardner said.

‘If sustained, this could reverse some of the improvement in housing affordability that has taken place in recent years. With consumer sentiment also likely to be dented by the uncertain outlook and the prospect of rising energy costs, housing market activity is likely to soften.’

Nationwide said its quarterly regional house price indices show most regions continued to see ‘modest’ house price growth.

Two of the 13 regions saw annual price declines. The weakest was the outer south east, down 0.7% on-year, followed by East Anglia, down 0.4%.

Northern Ireland outpaced the rest of the UK as prices rose 9.5% over the year. This was almost three times higher than the 3.3% recorded in the next strongest region, the north west.

Scotland saw 3.0% growth in the first quarter, while prices in Wales were up 2.7%. Overall house price growth in England slowed to 0.9% from 1.2% in the fourth quarter.

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