House prices jumped £3,000 last month despite a ‘subdued’ property market, according to the latest Halifax figures.
Low mortgage rates and strong employment are continuing to prop up house prices, Britain’s biggest mortgage lender said, but annual property inflation slipped back again to just 1.9 per cent, in May.
Meanwhile, the cost of the average home at £224,439 remains almost £4,000 below the peak of £228,102 reached in March.
The previously red hot London property market has suffered a reversal of fortune and homes there are now taking longer to sell and seeing prices cut
Halifax said that a shortage of homes on estate agents’ books is propping up prices.
The easing back of house price growth comes against a backdrop of a two-speed property market emerging across the UK.
In a reversal of fortune of recent years, London and the commuter belt are now suffering, with homes taking longer to sell and prices cut, while previously slower areas, including the Midlands, North and major regional cities are seeing higher demand driving sales.
The substantial 1.5 per cent rise in property values in May was put down to the volatility of monthly figures, whereas measured over a quarterly basis house prices are up just 0.2 per cent.
The decline in annual property inflation means that Britain’s salaries continue to rise faster in percentage terms than house prices, with the latest ONS figures showing wages up 2.6 per cent annually.
Halifax said that a shortage of homes on estate agents’ books is propping up prices.
Russell Galley, managing director, Halifax, said: ‘These latest price changes reflect a relatively subdued UK housing market.
‘After a sharp rise in January, mortgage approvals have softened in the past three months, whilst both newly agreed sales and new buyer enquiries are showing signs of stabilisation having fallen in recent months.
‘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.
‘We are also seeing pay growth edging up and consumer price inflation falling, and as a result the squeeze on real earnings has started to ease.
‘With interest rates still very low we see mortgage affordability at very manageable levels providing a further underpinning to prices.’