4th June 2015
The annual rate of house price growth edged up to 8.6% in May as the number of properties for sale fell to its lowest level for some time according to the Halifax.
The latest yearly growth figure marks a slight rise on April’s tally of 8.5% however prices actually fell down by 0.1% month-on-month in May.
Martin Ellis, housing economist, at the lender said: “Housing supply remains extremely tight with the stock of properties available for sale currently at its lowest level for many years. At the same time, ongoing economic recovery, increasing employment, real earnings growth and very low mortgage rates are all supporting housing demand.
“This combination has kept annual house price inflation well above earnings growth although activity levels are subdued”
As a result of the current environment Ellis expects that the imbalance between supply and demand is likely to continue to push up house prices over the coming months.
However he added: “Looking further ahead, the increasing level of house prices in relation to earnings is expected to dampen house price growth.”
Howard Archer, chief UK and European economist at research group IHS Global Insight expects that house prices will rise by 6% this year, up from a previous estimate of 5%.
He said: “We suspect that housing market activity will improve amid generally supportive fundamentals and will also benefit from reduced uncertainty following the decisive general election result.
“Our belief that housing market activity is now on the up after losing appreciable momentum during 2014 is supported by the Bank of England reporting that mortgage approvals for house purchases rose markedly in April to be at a 14-month high.”
While the recent shortage of properties coming on to the market seems to be exerting increasing upward pressure on house prices, Archer asserted that this may well have been influenced by heightened uncertainty ahead of the general election.
He said: “A crucial factor in the outlook for house prices is will there be a marked increase in the number of properties coming on to the market now that the election has produced a decisive result?”