Growing economic uncertainty in the UK is starting to weigh on consumer confidence and willingness to engage in major transactions such as buying a property, according to a leading economist.
With inflation rising, purchasing power is starting to weaken, and that largely explains why there has been a drop in mortgage approvals and house prices are falling across some parts of Britain.
Six of the 12 regions monitored by Nationwide saw the pace of house price growth decelerate in March, causing overall property price growth to fall for the first time in almost two years in March.
According to the latest Nationwide house price index, the average price of a home in the UK dropped by 0.3% in March – the first decline since June 2015.
On an annual basis, house price inflation slowed to a 19-month low of 3.5%, taking the average price of a property to £207,308.
“March’s softer Nationwide house price data following on from the Bank of England reporting a dip in mortgage approvals in February fuels our belief that the housing market is being increasingly affected by the increasing squeeze on consumers and their concerns over the outlook,” said Howard Archer, chief economist at IHS Global Insight.
Economists surveyed by Reuters had expected home prices to increase by 0.4% in March from February and annual growth of 4.1%, but many experts will now have to revise their projections for the market.
Archer added: “Markedly weakening consumer fundamentals, likely mounting caution over making major spending decisions, and elevated house price to earnings ratios are likely to weigh down on housing market activity and house prices. However, a shortage of supply is likely to put a floor under prices.”