The Nationwide House Price Index showed the annual rate of growth was lower than the 3.9% yearly increase recorded in the year to March, which the mutual said was expected due to the stamp duty changes at the start of April.
Robert Gardner, chief economist at Nationwide, said: “The softening in house price growth was to be expected, given the changes to stamp duty at the start of the month. Early indications suggest there was a significant jump in transactions in March, with buyers bringing forward their purchases to avoid additional tax obligations.”
He said the market was “likely to remain a little soft in the coming months”, following the usual pattern seen at the end of previous stamp duty holidays.
Gardner added: “Nevertheless, activity is likely to pick up steadily as summer progresses, despite wider economic uncertainties in the global economy, since underlying conditions for potential homebuyers in the UK remain supportive.
“Unemployment remains low, earnings are rising at a healthy pace in real terms; i.e., after accounting for inflation, household balance sheets are strong and borrowing costs are likely to moderate a little if bank rate is lowered further in the coming quarters, as we and most other analysts expect. Indeed, swap rates have moderated in recent weeks.”
How life insurance can benefit your health and wellbeing over the decades
Sponsored by Post Office
Earlier house sales impacting price growth
It was said that people bringing house sales forward to March in order to avoid the higher stamp duty tax led to the slower house price growth in April.
Matt Thompson, head of sales at Chestertons, said: “House hunters who entered the market in April were in less of a rush, with some even pausing their search amid the Easter holidays. Sellers, on the other hand, remained motivated and we have seen a clear uplift in homeowners listing their property for sale in April year-on-year.
“We therefore expect market activity and particularly buyer demand to pick up in early May, which will lead to a busier-than-usual summer market.”
Jonathan Handford, managing director at Fine & Country, said this could be a sign that the market was feeling the effects of tighter affordability and reduced stamp duty incentives.
He said the “cooling comes as no surprise, given that many buyers brought forward their purchases to beat the March threshold change, leaving a quieter pipeline in the immediate aftermath”.
“April’s slowdown reflects a natural rebalancing after a period of deadline-driven demand. But with inflation softening and rate cuts increasingly likely, the market could regain momentum later this year, provided affordability barriers are addressed,” Handford added.
Jonathan Hopper, CEO of Garrington Property Finders, said some parts of the housing market were in “morning after” territory and returned to the “conventional forces of demand and supply”, bringing prices down.
Hopper said: “In some parts of the UK, the supply of homes for sale is now far outstripping demand. This is especially true in more expensive, and often highly desirable, areas where the trickle of supply has turned into a flood.
“In these areas, buyers find themselves blessed with both abundant choice and considerable negotiating power – and this is keeping prices flat or even nudging them down.
“At the other end of the scale, in less expensive areas, the balance between the two forces is more equal, and prices are still creeping upwards as buyers compete for homes they feel represent strong value.”
This article was first published on YourMoney.com‘s sister site, Mortgage Solutions. Read: Annual house price growth slows to 3.4% in April, Nationwide finds
