ONS confirms UK house prices spike in March, softening seen since

UK house price growth accelerated to 9.0% in March compared to the previous year, according to official data, mostly due to the surge in demand for second homes ahead of an increase in buy-to-let stamp duty.

Data from the Office for National Statistics (ONS) showed house prices grew 2.5% month-on-month in March, up from the previous 0.2% monthly rise in February and 1.1% in January.

The annual increase of 9% was a 12-month high and an acceleration from the previous 7.60% and was led by price inflation of 10.1% in England, 6.4% in Northern Ireland and 2.1% in Wales, with a 6.1% year-on-year decline in Scotland.

London house prices rose 13.0% in the period and 12.2% in the South East and the 12.1% in the east of England.

Excluding London and the South East, UK house prices increased by 5.9% in the 12 months to March 2016.

The surge in demand due to the buy-to-let rush was supported by very strong mortgage lending from the Council of Mortgage Lenders.

ONS data lags many of the other measures as it is based on mortgage completions, with fresher house price data for April from Halifax showed prices slowing, following similar indications of a softening from Nationwide the week before.

Both April surveys indicated the drop-off in BTL was accompanied by heightened economic concerns that are amplified in the run-up to next month's Brexit vote.

Last week the Royal Institute of Chartered Surveyors reported the first fall in buyer enquiries since March 2015, though both surveyors and analysts expect to see a re-acceleration in the second-half of 2016.

RICS' gauge of new buyer inquiries fall off from a reading of +2 in March to -22 in April, its weakest print since September 2008.

House prices may well be softer for the next few months, acknowledged economist Howard Archer of IHS Global Insight.

"Nevertheless, we still expect house prices to post relatively solid increases over 2016 as a whole – likely by around 5-6% based on the surveys overall – with support coming from a relative shortage of properties as well as decent buyer interest," he said.

Assuming Britain votes to stay in the EU, which then reduces uncertainty and supports a pick-up in economic activity, Archer expects housing market activity to regain limited momentum in the second half of 2016.

"High employment, decent purchasing power and the probability that interest rates will not rise for some considerable time to come (and highly unlikely in 2016) should underpin buyer interest. A shortage of properties will also likely provide support to house prices."