House prices across England and Wales rose a bit more quickly this month after touching a seven-month low in March but they are still expected slow this year, reflecting weak economic growth and possibly higher interest rates, mortgage lender Nationwide said.
House prices rose 2.6% in the year to April compared with a rise of 2.1% in March and in line with the median forecast in a Reuters poll of economists.
Prices rose 0.2% on the month after a drop of 0.2% in March, also matching the median forecast in the poll.
House prices are rising much more slowly than before the 2016 referendum decision to take Britain out of the European Union, which hit consumer confidence and spending as the pound’s fall pushed up inflation.
Nationwide’s measure of house prices was growing by about 5% a year around the time of the Brexit vote and the lender said on Friday it continued to expect house price growth of just 1% in 2018.
“Looking ahead, much will depend on how broader economic conditions evolve, especially in the labour market, but also with respect to interest rates,” Robert Gardner, Nationwide’s chief economist, said.
The Bank of England has said it expects to continue raising interest rates after making the first increase in over a decade in November. Investors see a roughly 50-50 chance of a hike in May.
However, a shortage of homes for sale is expected to continue to shore up the housing market.
An industry group said earlier on Friday that in 2017/18 financial year, housing starts of 154,698 were 2% lower than a record high in 2016/17.
Prime Minister Theresa May wants construction of new homes to rise to 300,000 a year to tackle a shortage of housing.