Press release

20 May 2020 London, GB

Land Registry/ONS reports annual UK house price inflation edged up to 2.1% in March

The Land Registry/ONS reported annual house price inflation edged back up to 2.1% in March from 2.0% in February, thereby matching January’s highest level since November 2018. Prices fell an unadjusted 0.2% month-on-month in March

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  • The Land Registry/ONS reported annual house price inflation edged back up to 2.1% in March from 2.0% in February, thereby matching January’s highest level since November 2018. Prices fell an unadjusted 0.2% month-on-month in March
  • London prices notably rose 4.7% year-on-year in March, which was the strongest rise since December 2016 and up from 3.0% in February
  • The Land Registry/ONS’s measure of house price inflation is based on completed housing transactions. The ONS observed that typically, a house purchase can take six to eight weeks to reach completion. Therefore, the price data feeding into the March 2020 UK house price index will reflect completions that occurred before the Government’s measures to reduce the spread of COVID-19 took hold
  • The early-2020 upturn in the housing market was brought to a halt by the impact of coronavirus. Bank of England data shows that mortgage approvals for house purchases fell back sharply to a seven-year low of 56,161 in March from a more than seven-year high of 73,674 in February
  • Relief for the housing market has come from an easing of lockdown restrictions on 13 May under which buyers and renters can once again view properties physically, arrange removals and move home
  • While the easing of restrictions should allow housing market activity to progressively pick up, it looks unlikely to return to the levels seen at the start of 2020 for some considerable time
  • Activity is likely to be limited in the near term at least by the impact on the economy and the fact that consumer fundamentals have clearly taken a substantial downturn as a result of coronavirus. Some people have already lost their jobs, despite the supportive Government measures, while others may be worried that they may still end up losing their job once the furlough scheme ends. Additionally, many incomes have been negatively impacted. Consumer confidence is currently mired at or near record low levels on many measures and many are likely to remain cautious for some time to come to making major spending decisions such as buying or moving house
  • Consequently, the EY ITEM Club suspects house prices could fall back 5% over the next few months
  • The EY ITEM Club expects house prices to stabilise towards the end of the year and then start recovering gradually as the UK’s economic recovery gains traction, the labour market starts to recover and consumer confidence improves. Very low borrowing costs should also help matters with the Bank of England unlikely to lift interest rates from 0.10% until well into 2021. Even so, expect house price gains to be no more than 2-3% in 2021

Howard Archer, chief economic advisor to the EY ITEM Club, comments:

The Land Registry/ONS reported the year-on-year increase in house prices edged back up to 2.1% in March from 2.0% in February, thereby matching January’s highest level since November 2018. It has strengthened from 0.7% in August and July 2019, which had been the lowest rate since October 2012.

House prices fell an unadjusted 0.2% month-on-month in March. This followed a drop of 0.3% in February and a rise of 0.4% in January. Prices had dipped 0.3% month-on-month in March 2019.

London prices rose 4.7% year-on-year in March, which was up markedly from 3.0% in February and the strongest rise since December 2016). London house prices rose 1.2% month-on-month in March. The annual increase in UK house prices had been limited in much of 2019 and 2018 by falling year-on-year prices in London. Indeed, London house prices fell continuously year-on-year between February 2018 and August 2019, with a peak annual decline of 3.0% in May.

It needs to be noted that the Land Registry/ONS’s measure of house price inflation is based on completed housing transactions. The ONS observed that typically, a house purchase can take six to eight weeks to reach completion. Therefore, the price data feeding into the March 2020 UK house price index will reflect those completions that occurred before the Government’s measures to reduce the spread of COVID-19 took hold.

The housing market received a leg-up at the start of 2020 from increased optimism and reduced uncertainties following December’s decisive General Election result.

Housing market came to a standstill in late March and April as coronavirus restrictions brought early-2020 improvement to a halt

Housing market activity progressively lost momentum during March as it was increasingly affected by the impact of coronavirus on the economy and consumer activity, and it then came to a virtual standstill from 23 March when the lockdown was imposed. This standstill continued through April and seemingly through early-May. The Government advised homebuyers and renters to delay moving as much as they can while the emergency measures are in place. The Government further stated that no visitors are allowed to visit properties while “stay-at-home” measures are in force, including estate agents and surveys as well as potential buyers.

Prior to March, the housing market had enjoyed a markedly improved performance over the first couple of months of 2020 and at the end of 2019 as it benefitted from increased consumer confidence and reduced uncertainties following December's general election.

Latest data from the Bank of England shows mortgage approvals for house purchases fell back sharply to 56,161 in March (the lowest since March 2013) from a more than six-year high of 73,674 in February. Mortgage approvals for house purchases had previously risen to 73,674 in February (the most since January 2014) from 71,430 in January, 68,143 in December and a five-month low of 65,344 in October.

The April RICS survey reported that its findings “suggest that the Government’s ongoing lockdown measures to prevent the spread of the coronavirus are continuing to stifle activity across the housing market. With estate agents still closed in April, key activity indicators remain entrenched in negative territory.” Specifically, the survey showed record low balances for instructions to sell (-96%), newly agreed sales (-92%) and new buyer enquiries (-93%).

Relief for housing market has come from Government easing restrictions on 13 May

Relief for the housing market has come from an easing of restrictions on 13 May under which buyers and renters can once again view properties physically, arrange removals and move home. However, viewers must keep a two-metre distance from others and wear gloves where necessary while also keeping high-risk owners out of the home during a viewing.