Nationwide house price index reveals another boom in Yorkshire values but it may not last

Annual house price growth in the UK increased to 14.3% in March 2022 from 12.6% in February Wales remained strongest performing region while London remained weakest, according to the latest Nationwide house price index, which also revealed that detached properties have increased by nearly £68,000 since onset of pandemic, while average prices for flats are up £24,000. The average UK house price is now £265,312.

However, Robert Gardner, Nationwide's Chief Economist, believes that inflation and higher interest rates, look set to slow the phenomenal rise in residential property values, which have been turbo charged since since the start of the pandemic.

Nationwide's regional house price indices are produced quarterly, with data for quarter one - the three months to March 2022 showing an acceleration in annual house price growth in all but two regions. Yorkshire saw a 13% year-on-year rise in prices. Wales remained the strongest performing region with house prices up 15.3% year-on-year.

Commenting on the figures, Robert Gardner said: “March saw a further acceleration in annual house price growth to 14.3%, the strongest pace of increase since November 2004. Prices rose by 1.1% month-on-month, after taking account of seasonal effects, the eighth consecutive monthly increase. The price of a typical UK home climbed to a new record high of £265,312, with prices increasing by over £33,000 in the past year. Prices are now 21% higher than before the pandemic struck in early 2020.

“The housing market has retained a surprising amount of momentum given the mounting pressure on household budgets and the steady rise in borrowing costs. The number of mortgages approved for house purchase remained high in February at around 71,000, nearly 10% above pre-pandemic levels. A combination of robust demand and limited stock of homes on the market has kept upward pressure on prices.

“The continued buoyancy of housing demand may in part be explained by strong labour market conditions. The unemployment rate has continued to trend down in recent months (to 3.9% in the three months to January) from already low levels. Wage growth has accelerated, though it is running below inflation.

“The significant savings accrued during lockdowns is also likely to have helped prospective homebuyers raise a deposit. We estimate that households accrued an extra c£190bn of deposits over and above the pre-pandemic trend since early 2020, due to the impact of Covid on spending patterns. This is equivalent to around £6,500 per household, although it is important to note that these savings were not evenly spread, with older, wealthier households accruing more of the increase.

“Nevertheless, we still think that the housing market is likely to slow in the quarters ahead. The squeeze on household incomes is set to intensify, with inflation expected to rise further, perhaps reaching double digits in the quarters ahead if global energy prices remain high. Moreover, assuming that labour market conditions remain strong, the Bank of England is likely to raise interest rates further, which will also exert a drag on the market if this feeds through to mortgage rates."

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