House price annual inflation was 10.1% in England, 2.1% in Wales, 6.4% in Northern Ireland but fell by 6.1% in Scotland, taking the average price to £292,000, the data from the Office of National Statistics shows.
Annual house price increases in England were driven by growth in London of 13%, followed by 12.2% in the South East and 12.1% in the East of England.
However, excluding London and the South East, UK house prices increased by 5.9% in the 12 months to March 2016.
The data also shows that on a seasonally adjusted basis, average house prices increased by 2.5% between February 2016 and March 2016 and prices paid by first time buyers were 9.7% higher on average than in March 2015. For owner-occupiers prices increased by 8.7% for the same period.
This is the final release of the ONS House Price Index (HPI) which will be replaced by the new UK House Price Index from June 2016.
Richard Snook, senior economist at PwC, explained that buy to let investors rushing to complete purchases before the 3% stamp duty charge on additional properties came into effect at the beginning of April has affected the figures.
‘This move undoubtedly drove up demand and prices in March and we would expect demand to soften over the next few months as a result. There are no signs of any Brexit related slowdown in this month’s figures, although the underlying trends are masked by the effects of the stamp duty change,’ he said.
According to Rob Weaver, director of Investments at property crowdfunding platform Property Partner, the figures also show that the divide between north and south is widening while in London and the south east first time buyers are finding it harder to get on the housing ladder.
‘But with niggling doubts over the imminent EU referendum, we’re likely to see a short term dip in prices until the end of June. Then the fundamentals of strong demand and scant supply, rock bottom interest rates and healthy jobs market should reassert themselves,’ he added.
Randeesh Sandhu, chief executive officer of Urban Exposure, the residential development finance provider, also believes that activity is likely to slow down in the coming months following these changes and also in the run up the EU referendum with consumers remaining cautious against the backdrop of a potential Brexit.
‘However, it is clear that demand for housing remains strong and any impact of a Brexit is likely to be a short term trend with activity returning to normal soon after any decision. Therefore a real focus needs to be given to the housing shortages the UK faces,’ he said.
‘In London, the new Mayor, Sadiq Khan, has the opportunity to inject some fresh policies to the London housing market where house prices are particularly steep. However, Sadiq’s plan to quadruple the proportion of affordable housing being built must be carefully considered. Such a policy could end up backfiring and reducing the overall supply of new homes if developers decide to scrap plans or sit on sites until more profitable projects become available,’ he pointed out.
‘Where there is a real opportunity, in London and cross the UK, is the use of brownfield sites. Unlocking this land could lead to an estimated 365,731 new homes in London alone. To capitalise on this opportunity, the new Mayor must review the planning process, the costs associated with developing on brownfield sites and look at how to accelerate brownfield site development in order to deliver the homes that the UK needs,’ he added.
With demand from buy to let investors slowing, Jonathan Hopper, managing director of buying agents Garrington Property Finders, believes that the market is set to return to more normal levels of price growth.
‘However this gently cooling market may provide an opportunity for buyers, as some sellers are being forced to reassess their overly ambitious asking prices. On the frontline we’re now seeing many mid-range properties in the most desirable locations selling for below asking price, hinting that the power dynamic is shifting from a seller’s to a buyer’s market,’ he said.
‘In particular, investment properties of the sort favoured by buy to let buyers are increasingly being discounted as developers seek to offset the extra stamp duty. With the EU referendum still too close to call, the prospect of a Brexit will make its presence felt more in May and June as some investors hold off their purchases until the uncertainty is over,’ he added.
