The Halifax House Price Index’s release contributed to a fall in FTSE 350 housebuilder shares on Friday after the building society said average UK house prices fell 1% in the month of March.
Taylor Wimpey dropped 1.7%, Persimmon fell 1.4%, Barratt Developments shed 1.3%, and Crest Nicholson was off by 2%.
Although March prices dropped by 1% month-on-month, average UK house prices were up 2% on the quarter.
“UK house prices grew in March on a quarterly basis, by +2.0%, with annual growth slowing to +0.3%, from 1.6% in February. Compared to last month, the price of a UK property fell -1.0% or £2,908 in cash terms, with the average property now costing £288,430,” said Kim Kinnaird, Director, Halifax Mortgages.
“That a monthly fall should occur following five consecutive months of growth is not entirely unexpected particularly in view of the reset the market has been going through since interest rates began to rise sharply in 2022. Despite this house prices have shown surprising resilience in the face of significantly higher borrowing costs.”
As Kinnaird mentioned, house prices have been steadily increasing for five months, and as seasoned investors will be fully aware, no market moves in a straight line. The blip in housing prices has spurred a bout of profit-taking in FTSE 350 housebuilders on Friday after the sector rallied as house prices bottomed out last year.
A quarterly gain is an encouraging sign for the housing market, but with mortgage rates remaining elevated and many homeowners still to move onto mortgages at the new higher rates, the UK property market may still face some pain in the coming year.
“Affordability constraints continue to be a challenge for prospective buyers, while existing homeowners on cheaper fixed-term deals are yet to feel the full effect of higher interest rates. This means the housing market is still to fully adjust, with sellers likely to be pricing their properties accordingly,” Kinnaird said.
“Financial markets have also become less optimistic about the degree and timing of Base Rate cuts, as core inflation proves stickier than generally expected. This has stalled the decline in mortgage rates that had helped to drive market activity around the turn of the year.”
