A prominent housing market analyst has suggested President Donald Trump’s tariffs have a silver lining after all.
In response to the latest house price index Tom Bill, head of UK residential research at Knight Frank, says: “As buyers adapt to higher rates of stamp duty, the positive news is that US trade tariffs announced last week have put downwards pressure on borrowing costs as markets price in an economic slowdown.
“The Bank of England is now expected to cut rates three times this year rather than twice. The risk is that tariffs ultimately prove to be inflationary and the spillover effects mean upwards pressure on mortgage costs in the UK. For now, the spring market feels steady although the prospect of a tax-raising autumn Budget will throw more uncertainty into the mix later this year.”
Bill’s comments came following data from the Halifax showing that UK house prices fell by 0.5% in March, a drop of £1,575.
Despite this, the annual growth rate remained steady at 2.8%, with the typical UK property now valued at £296,699.
Amanda Bryden, head of mortgages at the lender, says: “House prices rose in January as buyers rushed to beat the March stamp duty deadline. However, with those deals now completing, demand is returning to normal and new applications slowing. Our customers completed more house sales in March than in January and February combined, including the busiest single day on record. Following this burst of activity, house prices, which remain near record highs, unsurprisingly fell back last month.
“Looking ahead, potential buyers still face challenges from the new normal of higher borrowing costs, a limited supply of available properties to choose from, and an uncertain economic outlook.
“However, with further base rate cuts anticipated alongside positive wage growth, mortgage affordability should continue to improve gradually, and therefore we still expect a modest rise in house prices this year.”
High profile agents have generally reacted calmly to the dip in prices – although do not necessarily agree that more rate cuts are on the horizon.
Jeremy Leaf, north London agent and a former RICS residential chairman, comments: “Although the small reduction in house prices noted last month has continued, activity still held up relatively well as the figures will not cover transactions which completed before the deadline to take advantage of the stamp duty concession. There’s no doubt that many purchases were brought forward as a result so we might have expected to see more impact in the data.
“Buyers and sellers who missed out on the stamp duty savings had the choice to stay put, keep to previously-agreed terms and continue with their move or try to re-negotiate in an attempt to find some middle ground. The last option has proved the most popular in our offices. However, worries about short-and-longer term economic prospects both here and abroad, have been driving that decision-making (or lack of it) over the past few weeks at least.”
And Jason Tebb, president of OnTheMarket, adds:”The housing market continues to shake off external economic concerns demonstrating remarkable resilience, with good levels of activity and interest, particularly ahead of the end of the stamp duty concession. Recent base rate cuts have done much to provide a boost to confidence and activity in the market. With the stamp duty savings now behind us, further rate reductions from the Bank of England would be timely, providing much-needed impetus as the year progresses.
“The relative steadiness of house prices suggests that affordability is keeping a lid on values with buyers not prepared to pay inflated amounts. Sellers keen to take advantage of what is traditionally a busy spring market should seek advice from an experienced agent to take into account local market nuances and price accordingly if they wish to achieve a timely sale.”
Nathan Emerson, chief executive of Propertymark, remarks: “This house price reduction will be a huge disappointment to many sellers hoping to make gains on a house sale to climb up the housing ladder, but it could also be an opportunity for aspiring homeowners to take advantage of the slight reduction in house prices and take their first step, or next step, onto the housing ladder.
“Hopefully this month on month dip is only temporary. The spring and summer months normally spur on a flurry in housing activity, especially at a time when there are many competitive mortgage deals out there right now as a result of the reduction in interest rates last year.
“However, with housing playing a vital role in the UK economy, international events could jeopardise the Bank of England’s target of a 2% inflation rate, which may thwart their ambitions to reduce interest rates further. The housing market must remain stable ahead of the Bank of England’s next decision on interest rates in May.”
