Average UK house prices grew by 5.7% year-on-year in March. While having slowed from December’s 6-year high growth of 7.3% year-on-year, price momentum remains impressive especially considering that the UK has been plunged in a national lockdown since 4 January. However, last month saw a barrage of positive news and policy support for the housing market announced by the Chancellor of the Exchequer in his Spring Budget on 3 March. The extension of the stamp duty for another three months and 95% mortgages for first-time buyers are likely to continue to provide support for the housing market in the near-term. The longer-term outlook remains highly uncertain and highly dependent on the speed of economic recovery and ongoing support for housing demand in the form of policy incentives.
Chart of the month: Monthly UK house price, annual % change
Source: Nationwide House Price Index, Blend Network
Market Commentary
- In March, average UK house prices grew by more than 5% year-on-year for the seventh consecutive month (chart of the month). The past few months have seen the strongest and most sustained period of growth in the UK housing market since 2013-15 when between September 2013 and May 2015, prices rose by an average 8.3% year on year in this period. We generally agree with Robert Gardner, Nationwide’s Chief Economist, in that given that the wider economy and the labour market has performed better than expected in recent months, the slowdown in March likely reflects a softening of demand ahead of the original end of the stamp duty holiday before an extension was announced.
- Looking at the quarterly trends, we see that the UK northwest remains the fastest-growing area. This region saw an impressive 8.2% year-on-year growth in Q1 2021 and was also the fast-growing region in 2020 with 5% growth last year amid the pandemic. West Midlands was the second-strongest region: Q1 prices rose by 7.6% year-on-year.
- Following the Prime Minister’s promise and commitment to revitalise the north and news suggesting ‘Boris Johnson plans to pour billions into Midlands and North’ (link), we are very bullish on the regional, especially northwest and Midlands, housing market over the next few years. We believe Greater Manchester, the wider northwest region and East and West Midlands will perform strongly over the next few years.
Figure 1: UK regional quarterly house price growth
Source: Nationwide House Price Index, Blend Network
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