House prices set to be bolstered by scant supply
HOUSE prices dropped in May, one of the UK’s major mortgage providers said yesterday, but analysts expect a quick rebound.
Houses lost 0.1 per cent of their value from April to May, according to figures published by Halifax.
However, house prices are up 8.6 per cent compared to May 2014.
Nationwide said earlier this week that price growth was 4.6 per cent. While the two survey’s differ in their methodologies, giving varying figures, both show price growth running above income growth. Housing experts point to the fact that the supply of housing has not kept up with demand.
“House prices fell in May as pre-election uncertainty led to less activity in the market and a consequential dip in house price rises. Now that the result of the election is known, demand will increase as those who have been holding off from entering the market return,” said Stephen Smith, a director at the Legal and General Mortgage Club.
The current lack of supply means that an increase in demand will drive up prices in the remainder of the year as more people compete for fewer properties. The Government has promised to build more houses and we need to see action on this now so that a strong pipeline of new homes is in development. This will keep prices affordable and make homeownership an achievable goal for people looking to buy.”
Economist Martin Ellis from Halifax 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.”