In March, British house prices experienced their most rapid annual growth since December 2022, according to a survey released on Tuesday, indicating a continued alleviation of pressure from elevated interest rates.
Nationwide Building Society, the second-largest mortgage lender in Britain, reported a 1.6% increase in house prices in March compared to the previous year, with the average price reaching £261,142 ($328,229). This growth accelerated from February's 1.2% annual increase.
Despite a 0.2% decline in prices in March alone—the first drop since December 2023 following a 0.7% rise the month prior—the annual acceleration surpassed economists' expectations. Experts had anticipated a 0.3% monthly increase on a seasonally adjusted basis and a stronger 2.4% annual rise.
Nationwide economist Robert Gardner noted that while activity in the housing market has improved since the latter part of 2023, it remains relatively subdued compared to historical norms. He also highlighted that as house prices are rising more slowly than wages, which have seen an approximately 6% increase from a year ago, affordability constraints are gradually easing.
According to Pantheon Macroeconomics chief UK economist Rob Wood, property prices are expected to rise by 4% in 2024. Based on forward-looking indications, he expects prices to continue rising as mortgage rates continue to fall.
During the COVID-19 pandemic, British house prices surged by over 20%, but they slightly declined thereafter due to factors such as bond market turmoil during Liz Truss' short premiership and a significant uptick in interest rates. The Bank of England raised its main interest rate to 5.25% in August 2023, marking the highest level since 2008. However, financial markets foresee a potential rate cut in June or August, with rates expected to decrease to around 4.5% by year-end, thereby reducing the cost of new mortgages.
Data from the Bank of England revealed that lenders approved the highest number of mortgages since September 2022 in February. Despite this, the figure of 60,383 approvals remains approximately 10% below its pre-COVID average.
For the first quarter of the year, house prices recorded a 1.1% increase compared to the previous quarter, marking the most rapid three-month rise since the period ending in July 2022, according to Nationwide. Notably, Northern Ireland saw the largest annual increase in prices at 4.6%, while southwest England experienced the greatest decline at 1.7%. Meanwhile, prices in London rose by 1.6%.
