Nationwide attributed the fall to a temporary boost in house purchase activity in March ahead of the stamp duty changes.
There were 165,400 transactions in March, an all-time high, some c11% higher than the previous peak of c149,000 recorded in January 2007.
CML estimates show that mortgage lending also rose sharply, to almost £26bn in March, up 43% from the £18bn recorded in February and nearly 60% year-on-year. The figures are also well above recent highs of c£22bn per month recorded in early 2015, though still well below the all-time high of £34.9bn recorded in June 2007.
Robert Gardner, Nationwide's Chief Economist, said:
“This slowdown returns the annual pace of house price growth to the fairly narrow range between 3% and 5% that had been prevailing since the summer of 2015.
“It may be that the surge in house purchase activity resulting from the increase in stamp duty on second homes from 1 April provided a temporary boost to prices in March.
“However, it is possible that the recent pattern of strong employment growth, rising real earnings, low borrowing costs and constrained supply will tilt the demand/supply balance in favour of sellers and exert upward pressure on price growth once again in the quarters ahead.
“House purchase activity is likely to fall in the months ahead given the number of purchasers that brought forward transactions. The recovery thereafter may also be fairly gradual, especially in the BTL sector, where a wealth of other policy changes, such as the reduction in tax relief for landlords from 2017 are likely to exert an ongoing drag."
Jeremy Leaf, former RICS chairman and north London estate agent, commented:
"It is surprising that Nationwide is already reporting a slowdown in annual house price growth. The party seems to have ended earlier than expected and due to the historic nature of such data, this doesn’t bode particularly well for the next few months for the property market, especially when you take into account uncertainty caused by other factors. As far as the housing market is concerned, that Brexit vote can’t come soon enough."
Rob Weaver, director of Investments at Property Partner, added:
“No ifs, no buts. With just a few months warning, it was almost inevitable there’d be a dampening in April, in sharp contrast to a surge in activity in March with the knock-on effect on house prices.
“Buy-to-let investors were falling over themselves to beat the Stamp Duty deadline and who could can blame them? Landlords eager to push ahead with their purchases rather than suffer the 3% hike undoubtedly produced this record high in monthly transactions. Where next is more difficult to judge."
