House prices rise by 0.5% month-on-month in May after April dip
House price growth accelerated in May, amid 'supportive' underlying conditions for home buyers, according to an index.
Property values increased by 0.5% month-on-month in May, following a 0.6% fall in April, taking the average UK house price to £273,427, Nationwide Building Society said.
The typical UK house price increased by 3.5% annually in May, compared with 3.4% in April.
Robert Gardner, Nationwide's chief economist, said: 'Despite wider economic uncertainties in the global economy, underlying conditions for potential home buyers in the UK remain supportive.'
A stamp duty holiday ended in March, with recent figures showing there was a stampede to get sales over the line before the deadline, followed by a transactions dip.
HM Revenue and Customs (HMRC) figures published last week showed an estimated 64,680 house sales took place in April – 64% lower than the 177,440 reported in March.
The study indicated the figures had been affected by changes to stamp duty rates which apply in England and Northern Ireland.
Outlining underlying conditions which could be positive for home buyers, Mr Gardner said: 'Unemployment remains low, earnings are rising at a healthy pace, household balance sheets are strong and borrowing costs are likely to moderate a little if (the Bank of England base rate) is lowered further in the coming quarters as we, and most other analysts, expect.'
Iain McKenzie, chief executive of the Guild of Property Professionals, said: 'After the surge in transactions earlier this year, driven by the stamp duty deadline, April's drop in sales was expected. It's likely we'll see a short period of adjustment but agent sentiment, as captured in the latest (Royal Institution of Chartered Surveyors) data, suggests optimism for the second half of the year.'
Jason Tebb, president of OnTheMarket, said: 'Even though a considerable number of buyers brought forward transactions to take advantage of the stamp duty concession before it ended in March, there is still plenty of activity in the market now the incentive is no longer available.'
He added: 'Lenders have been trimming mortgage rates and easing criteria in recent weeks which should help a little, giving buyers who rely on mortgages more wiggle room.'
Alice Haine, a personal finance analyst at Bestinvest by Evelyn Partners, said: 'The traditional surge in listings at this time of year is a positive buyers can take advantage of, as a wider stock of homes to choose from raises the potential for heavier negotiation on price.'
Tom Bill, head of UK residential research at Knight Frank said: 'There are tentative signs of momentum in the UK housing market after a slump in activity in April caused by higher rates of stamp duty but a dramatic rebound in prices doesn't feel likely.
'Concerns around inflation and the Government's financial headroom mean mortgage rates don't feel poised to drop meaningfully. Buyers also have a lot of properties to choose from this spring, which we expect to keep downwards pressure on prices in the short term.'
David Johnson, managing director of property consultancy Inhous, said: 'Buyer demand picked up immediately after the bank holidays and has remained strong throughout May.'
Karen Noye, mortgage expert at wealth manager Quilter said: 'Mortgage rates continue to improve meaning more buyers are finding the confidence to enter the market.
'Although lenders have started to reduce rates, many borrowers are still facing higher monthly costs than they would have a couple of years ago, particularly those coming off ultra-low fixed deals. Affordability stress testing also remains a barrier, with lenders continuing to apply caution particularly for those with smaller deposits or variable income.
'Some existing borrowers are resorting to term extensions or interest-only arrangements to ease the pressure on monthly budgets, but these are not long-term fixes and often result in higher overall repayment costs.
'The underlying issue is that property prices remain significantly out of line with average earnings, particularly in southern England, and that mismatch is limiting how far the market can stretch.
'Looking ahead, if interest rates fall further, we may see further house price increases, but with ongoing economic uncertainty, many would-be movers may decide to hold off until the outlook becomes clearer. The market is still navigating a complex landscape.'
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