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House prices up 2 per cent in quarter to May

House prices in the latest three months (March-May) were 2.0% higher than in the preceding three months (December 2014-February 2015) according to the latest Halifax House Price Index.

The quarterly rate of change fell for the second successive month and compares with 2.6% in March.

Prices in the three months to May were 8.6% higher than in the same three months a year earlier. This was slightly higher than April’s 8.5%, maintaining the annual rate within the narrow range of 8-9% where it has been throughout the period since last October with the sole exception of December (7.8%).

House prices edged down (-0.1%) between April and May.

Home sales fell in April. UK home sales dropped by 3.4% between March and April to 97,020. Nonetheless, according to HMRC data sales in the three months from February to April were marginally higher (+1.3%) than in the preceding three months.

Mortgage approvals continue to pick-up. The volume of mortgage approvals for house purchases – a leading indicator of completed house sales – increased by 9.9% in April. Whilst approvals in the three months to April were 6.6% higher, according to Bank of England data than in the preceding three months (November 2014-January 2015), they were 4.3% lower than in the same three months a year ago.

Supply remains tight. The stock of homes available for sale fell further in April and is currently at its lowest level for many years. RICS reported new instructions declined in April for the eighth month in the last nine, contributing to the very low levels of supply.

Increase in those thinking it is a good time to buy. The latest Halifax Housing Market Confidence Tracker shows that the net proportion of consumers who believe the next 12 months will be a good time to buy increased from +21 in March to +26 in April. In contrast, the net proportion that thinks that the next year will be a good time to sell fell from +33 to +30. The headline House Price Outlook balance (i.e. the difference between the proportion of people across Britain that expect the average property price to rise less the proportion who think it will fall) fell to +58 in April from +64 in March 2015.

Commenting, Martin Ellis, housing economist, said:

“House prices in the three months to May were 2.0% higher than in the preceding three months. This measure of the underlying rate of house price growth eased for the second consecutive month, falling to its lowest since January. Annual house price growth, however, rose marginally from 8.5% in April to 8.6% and continues to be in the narrow range of 8-9% where it has been throughout 2015 so far.

“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.

“The imbalance between supply and demand is likely to continue to push up house prices over the coming months. Looking further ahead, the increasing level of house prices in relation to earnings is expected to dampen house price growth.”

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