The Nastionwide Building Society has reported that annual house price growth slowed to 5.7% in March, from 6.9% in February.
Prices fell by 0.2% month-on-month, after taking account of seasonal effects, following a 0.7% rise in February.
Robert Gardner, Nationwide’s chief economist, said: “Given that the wider economy and the labour market has performed better than expected in recent months, the slowdown in March probably reflects a softening of demand ahead of the original end of the stamp duty holiday before the Chancellor announced the extension in the Budget.
“Recent signs of economic resilience and the stimulus measures announced in the Budget, including the extension of the furlough scheme and the stamp duty holiday, as well as the introduction of a mortgage guarantee scheme, suggest that housing market activity is likely to remain buoyant over the next six months.
“The longer-term outlook remains highly uncertain. It may be that the recovery continues to gather momentum and that shifts in housing demand resulting from the pandemic continue to lift the market. However, if the labour market weakens towards the end of the year as policy support is withdrawn, as most analysts expect, then activity is likely to slow nearer the end of 2021, perhaps sharply.
“Overall UK annual house price growth in Q1 was similar to Q4, although there was a mixed picture across the regions, with around half seeing a slowdown in growth.
“Northern Ireland saw the highest growth of the home nations, with a 7.4% increase. Meanwhile, Wales and Scotland both saw an acceleration in annual price growth to 7.2% and 6.9% respectively.
“England was the weakest performing home nation in the three months to March 2021, with annual house price growth of 6.4% – a slight slowing compared with last quarter (Q4 2020), when prices rose at an annual rate of 6.9%.
“The North West was the strongest performing region, with prices up 8.2% year-on-year. This is the strongest price growth seen in the region since 2005 and average prices reached a record high of £181,999. There was also a further pick up in price growth in the neighbouring North, which saw a 7.2% annual increase.
“London was the weakest performing region, with annual price growth softening to 4.8%, from 6.2% in Q4 last year.”
Nicky Stevenson, managing director at national estate agent group Fine & Country, added: “House price growth has touched the brakes but the market is set to be racing ahead again in the coming months with tax breaks, low rates and a stampede for more space forcing buyers to chase the market.
“Despite a slight softening in the growth rate in March, this is still the eighth record high for average prices since July, as valuations hammer away at the ceiling of what is possible in these unique market conditions.
“This week’s mini-heatwave is a reminder of the power of better weather which is expected to take activity up another gear over the next few weeks and beyond. The sunny surge that we see every year brings more property to market in April. Gardens start to look better and homeowners can gear up for a desirable summer move.
“Surging activity could last even longer this year though, with even the traditional summer slowdown in doubt. The market normally catches its breath over July and August as people go on holiday but there’s no guarantee getaways will be possible this year. That could propel house hunting from a national obsession into a national pastime.
“Larger properties are still driving the lion’s share of price increases. These homes feel the least benefit from the stamp duty holiday so it is still the pandemic and the need for more space, rather than tax breaks, that are the authors of this buoyant market.”