The rise in house prices recorded by Halifax in March probably marks the start of a renewed surge in house price inflation into double figures over the summer.
Prices resume increase on extension of policy support
- The rise in house prices recorded by Halifax in March probably marks the start of a renewed surge in house price inflation into double figures over the summer.
- The 1.1% m/m rise in the Halifax house price index in March was much stronger than the consensus forecast of -0.1% m/m, and the 0.2% m/m drop in prices recorded by Nationwide. The Halifax index has been somewhat softer than the Nationwide’s in recent months, so the stronger March reading closed the gap. (See Chart 1.) The increase in prices on the month took annual growth in the Halifax index up from 5.2% to 6.5%, the highest since November.
- Given the extension of the stamp duty holiday in March, when demand was still robust and stock limited, house price inflation is likely to strengthen further over the summer. The RICS sales to unsold stock ratio, a measure of market tightness, suggests that competition between buyers for available homes is the hottest it has been since 2004 consistent with house price inflation rising into double digits in the coming months. (See here.)
- Overall, we think that the increase in the Halifax house price index in March marks the start of a strong summer for house prices. The reimposition of stamp duty and the end of the furlough scheme will eventually cool the market towards the end of the year. But continued low interest rates, good mortgage affordability, and a strong economic rebound should prevent the boom being followed by a bust.
Chart 1: House Prices
Sources: Nationwide, Halifax, Capital Economics
Table 1: Halifax House Price Index
House prices (£000s)
Andrew Wishart, Property Economist, +44 (0)7427 682411, firstname.lastname@example.org