House prices rose again last month but growth is expected to slow down later in the year as affordability issues increase.
According to the latest Halifax House Price Index, house prices rose by 0.6% in May, largely offsetting April’s dip of 0.8%.
This fall was a result as a result of investors looking to beat the stamp duty deadline on 1 April by bringing forward transactions.
The average price of a property is now £213,472, up from 212,204 in April.
On an annual basis prices have risen 9.2%, the lowest since last autumn.
Martin Ellis, Halifax housing economist, said: “Low interest rates, increasing employment and rising real earnings, continue to support housing demand. The strength of demand, combined with very low supply, is causing house prices to rise at a brisk pace in quarterly and annual terms.
“Increasing affordability issues, caused by a sustained period of higher-than-earnings house price growth, should curb housing demand and result in some slowdown in house price growth as the year progresses.”
Jeremy Leaf, a former RICS chairman and north London estate agent, said: “It is encouraging for the longer-term health of the market that property prices haven’t dropped substantially following the introduction of the stamp duty surcharge for landlords and second homeowners at the beginning of April. But it is clear that house prices are being underpinned by a shortage of stock and substantial reduction in transaction volumes.
“However, with the EU referendum looming on the near horizon it is probably a little early to make too broad a judgement on these figures. Once the vote is out of the way and the result is in, hopefully the market will settle down again very soon after. At the moment the uncertainty means people are holding off making decisions – who is going to decide to buy a property if they don’t know whether they are going to get that pay rise or even be laid off, depending on the outcome of the referendum?”
Figures from the Bank of England show that the volume of mortgage approvals for house purchases fell by 5.8% between March and April to 66,250.
According to HM Revenue and Customs, residential property transactions in April were 45% down on the previous month.
There were 84,280 completed sales of residential properties in April, down from March’s figure of 153,700. Compared with the same month last year there were 14.5% fewer transactions.
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