House prices demonstrated a greater annual growth despite a slight decline of -0.2% in March, as reported by Nationwide. The first quarter of 2024 witnessed significant growth in northern regions, particularly the North East (2.3%) and the North West (1.6%). London also experienced above-average quarterly growth (1.6%), attributed to the ongoing trend of seeking more spacious living arrangements post-pandemic.
The initial fervor in the housing market observed at the beginning of 2024 has begun to stabilize. The reduction in mortgage rates spurred market activity, with February’s mortgage approvals reaching a 17-month high, just -7% below the 2017-19 average according to the Bank of England (BoE). However, this heightened activity is unlikely to persist into March, as mortgage rates have nearly returned to their late December levels. Sales agreed upon in March were only 2% above the 2017-19 average, a decline from February’s 13% surplus, according to TwentyCI.
While the number of completed transactions increased slightly to 73,360 in February according to HMRC, it still lagged -11% below the 2017-19 average.
Although demand remains positive, it has been tempered by the rise in mortgage rates. The improved market sentiment has prompted more sellers to list their properties, increasing stock levels. However, buyers continue to face affordability challenges. According to the RICS February survey, while the number of surveyors reporting increasing supply grew, those reporting increasing demand remained steady. This shift in the supply-demand balance could potentially slow down price growth.
Most regions experienced house price declines in the more delayed Land Registry data. Scotland was the sole region with positive annual growth (1.1%) up to December 2023. The most significant decreases were observed in the South East (-3.6%) and East of England (-3.6%), particularly in rural areas that had witnessed robust price growth during the pandemic, such as Hastings (-11.2%), Thanet (-8.6%), and Lewes (-8.1%).
The prospect of the first base rate cut looms closer as labor market and inflation expectations normalize. Inflation continued to fall short of expectations, and the BoE foresees it dipping below the 2% target in April. While the Bank remains cautious of high wage growth and the potential impact of the minimum wage increase on April 1st, wage growth has slowed in recent months. Oxford Economics still predicts the first rate cut to occur in June.
In February, annual rental growth across the UK stood at 7.1%, a slight decrease from 7.5% in January, according to Zoopla. Although all regions have witnessed annual rental growth fall below 10%, regional discrepancies persist, with Scotland (9.9%), the North East (9.9%), and Wales (9.5%) still showing robust growth.