House price growth remained strong in March but uncertainty over the EU referendum later in the year could slow down the market.
According to the latest Halifax House Price Index, annual house price growth was up 10.1% to £214,811 for the three months to March.
House prices rose by 2.6% in March following a 1.5% fall in February.
Martin Ellis, Halifax housing economist, said: “Worsening sentiment regarding the prospects for the UK economy and uncertainty ahead of the European referendum in June could result in some softening in the housing market over the next couple of months.
“Current market conditions, however, remain very tight with an acute supply/demand imbalance continuing despite an improvement in the number of properties coming on to the market for sale in recent months. This, together with continuing low interest rates and a healthy labour market, indicate that house price growth is set to remain robust.”
There has been a surge in borrowing due to buy-to-let investors looking to invest before the 1 April stamp duty rise. However, the market is expected to dampen in the coming months as landlords become more reluctant to invest in property.
The stamp duty increase has been implemented by the government to cool off the buy-to-let market and help boost opportunities for first-time buyers. In addition, the basic rate of tax relief landlords can claim on properties is set to fall to 20% from April 2017.
Plans have also been unveiled by the government to clamp down on buy-to-let mortgage lending over concerns that the market could overheat by handing over new powers to the Bank of England.
Brian Murphy, head of lending at Mortgage Advice Bureau, said: “As the financial year came to a close, house prices rocketed in the biggest annual rise seen since July 2014. This coincided with the last-minute rush for those looking to buy an additional property before the stamp duty tax surcharge came into play on the 1 April, which is likely to have played a role in temporarily boosting house prices.
“Although this may come as another blow to those trying to get their foot on the property ladder, today’s rock-bottom mortgage rates and the huge number of products available means mortgages are far more affordable than we have seen in a very long time. However, meeting stringent affordability criteria and saving up for a deposit are significant hurdles hopeful homebuyers have to jump over before they can take advantage of today’s low-cost mortgages.
“In upcoming months, we expect house prices to follow a steadier trajectory as the market adapts to the new stamp duty changes and those in the buy-to-let and second homes market weigh up how this will affect their finances. However, if the number of new homes coming onto the market remains subdued, prices will continue to rise for the foreseeable.”
