House Prices Surge and Could Continue To Rise as Properties For Sale at Record Low
House prices rose by another 8.6 per cent year-on-year in May as the number of properties available for sale remained at its lowest level for many years, Halifax said this week.
Prices actually edged slightly lower in May, dropping by 0.1 per cent in May compared with a 1.6 per cent surge in April, according to the latest data from the mortgage lender.
However, viewed across the year, the rate of growth was 0.1 percentage point higher than the previous month at 8.6 per cent. The latest movements bring the average house price to £196,067 across the country, up another £12,619 in one year alone.
Halifax forecast that prices would continue to rise in the coming months as the imbalance between supply and demand hang over the property market. However looking further ahead, it predicted house price growth would be dampened by the increasing level of house prices in relation to average earnings.
Home sales also dropped in April, the latest month for which statistics are available from HMRC. Sales fell by 3.4 per cent between March and April to 97,020 as homeowners shied away from putting their homes on the market.
Housing economist Martin Ellis 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.'
Although the number of people moving remains at rock bottom, the number of people who think it is a good time to buy has increased.
Homebuyers continue to benefit from record-low interest rates, which have kept the cost of borrowing in check since the Bank of England cut the base rate to 0.5 per cent more than six years ago.
Changes to the way stamp duty is calculated, announced by the Chancellor George Osborne in the budget, have also relieved some of the pressure on the majority of homeowners, who will now face lower bills.
Before the May 7 UK election, analysts surmised that low levels of activity in the housing market could have been due to the uncertainty it created due to an outcome that was too close to call and the prospect of the introduction of a mansion tax in the event of the Labour party forming a government.
House price data in the coming months will reveal whether movement has picked up again in the wake of the election and the slim majority victory by the Conservatives.
Howard Archer, chief UK and European economist for IHS Global has revised his UK house price growth forecast to 6 per cent from 5 per cent for 2015, largely due to the impact of a lack of properties coming on to the market.
Solicitor, Executive Director, Head of Residential Property Services
Banner Jones Solicitors
Tel 01246 560560
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