UK house price growth slowed in March, prompting warnings that the squeeze on household incomes and rising interest rates could push the cost of homes down despite demand for property outstripping supply.
Property prices increased by 9.8 per cent over the year to March, down from 11.3 per cent in February, according to Land Registry figures released on Wednesday. The average cost of a home was £278,000, up £24,000 from the same time last year.
The data, which reflected purchases completed months before inflation reached its current 40-year high, showed house prices growth was resilient in the first quarter but may not be sustainable as the cost of living crisis bites.
“While the housing market is certainly defying the wider economic climate, this will not continue forever,” said Amanda Aumonier, head of mortgage operations at online broker Trussle. She added that indications house prices would fall “could be on the horizon”.
Aumonier noted the growing gap between pay and house prices. According to the Office for National Statistics, the average house price-to-earnings ratio in England was 9.05 last year, compared with 7.15 recorded in 2007 before the financial crash.
Home costs have surged in the past two years after the government introduced a temporary cut to stamp duty, which ended in March 2021, and people made lifestyle changes during lockdowns, fuelling a house-buying frenzy.
But with UK inflation reaching 9 per cent in April and economic growth slowing, while spending power is squeezed and mortgage rates rise, the housing market could cool.
Average house prices fell in 15 London boroughs between February and March, including in Hackney, where the cost of homes declined 2.8 per cent. In the City of London they slipped 3.5 per cent, but prices edged up 0.3 per cent nationwide.
Estate agents said an ongoing shortage of homes and high demand would continue to buoy property prices. Jason Tebb, chief executive of website OnTheMarket.com, said the housing market continued to “defy expectations” with prices increasing across the country.
“The number of properties newly listed for sale is slowly increasing and, if this continues, supply-demand economics suggests price growth will moderate,” he said. “But as yet, the fundamental lack of stock is not able to satisfy strong demand from serious buyers.”