UK house price growth slows in May, Nationwide reveals

UK house price growth slowed in May compared to the same month a year ago, Nationwide data revealed on Wednesday.

The annual rate of house price growth was 4.7% in May, down from 4.9% in April and 5.7% in March. Economists had expected a 0.3% gain.

On the month, house prices rose 0.2% in May, in line with April and below estimates for a 0.3% increase.

Nationwide said the rush of buying ahead of higher stamp duty on buy-to-let and second home purchases on 1 April, meant the market had started to cool.

"House purchase activity is likely to fall in the months ahead, given the number of purchasers that brought forward transactions," said Nationwide chief economist Robert Gardner.

"The recovery thereafter may also be fairly gradual, especially in the [buy-to-let] sector, where other policy changes, such as the reduction in tax relief for landlords from 2017, are likely to exert an ongoing drag.”

Nevertheless, he sees a steady increase in housing market activity once the stamp duty-related volatility passes, supported by low borrowing costs and a healthy labour market.

However, with the cost of the average home in the UK having risen to £204,368, first-time buyers are struggling to get on the ladder.

Meanwhile, economists have warned a vote by Britain to leave the European Union in a 23 June referendum could hurt the housing market.

“A vote to leave the EU would be liable to see a marked hit to UK economic activity over the rest of this year and in 2017 amid heightened uncertainties, which would likely weigh down heavily on the housing market,” said Howard Archer, chief UK and European economist at IHS Global Insight.

Assuming Britain remains in the EU, Archer expects house prices to rise around 5% on the Nationwide measure over 2016 with limited momentum in the latter part of the year.

He said high employment, decent purchasing power and the probability that interest rates will not rise for some considerable time to come should underpin house buyer interest. A shortage of properties will also likely provide support to house prices, Archer added.