House prices still rising but market is softening, Halifax figures show

Prices grew at a faster than expected rate last month according to the Halifax House Price Index, which has reported a 1.5 per cent hike for May.

In three months to May, house prices rose 1.9 per cent from the previous year, slower than the 2.2 per cent increase in three months to April. On a quarterly basis were up 0.2 per cent in March, April and May combined. 

Agents remain wary of what the recent blizzard of contrasting price indices actually mean.

Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “Once again we are seeing the rather topsy turvy pattern to the housing market - up one month, down the next. It is the same on the ground - no real pattern, with buyers and sellers negotiating hard but not always successfully. Looking forward, we expect more of the same and possibly slightly better as we await figures reflecting the crucial spring market period.”

Mike Scott, chief property analyst at online agency Yopa, adds: “The fundamentals of the market are still strong, with tight supply, strong employment figures, average wages rising faster than inflation and continuing low mortgage interest rates. We are unlikely to see much more of a turndown in prices unless those economic fundamentals change. However, both supply and demand are subdued compared with last year.”

Analysts echo the uncertainty of agents. 

Howard Archer, chief economic adviser at the Ernst & Young ITEM Club, says limited purchasing power, fragile confidence and continuing political uncertainty are having an effect. 

"The ongoing softness in house prices comes amid still lacklustre housing market activity. The further dip in mortgage approvals in April – albeit slight – looks particularly disappointing given housing market activity that they had likely been adversely affected in March by the severe weather.”

The Halifax itself says the housing market will be helped by external elements.

Russell Galley, Halifax managing director, says: "The continuing strength of the labour market is supporting house prices. In the three months to March the number of full-time employees increased by 202,000, the biggest rise in three years. With interest rates still very low we see mortgage affordability at very manageable levels providing a further underpinning to prices.”