UK house prices rise 1.1% in May before Brexit, says ONS

UK house prices rose 1.1% in May compared to a month ago, even in the uncertainty leading up to Britain’s European Union referendum on 23 June.

The Office for National Statistics said the average price of a home in the UK was £211,230 in May, up 8.1% on the same month a year ago. It followed April’s 8.2% year-on-year increase and 0.8% month-on-month gain.

London once again saw the biggest growth in house prices in May with increases of an annualised 13.6% and monthly 1.5% to an average of £472,163.

“Pretty solid fundamentals for house buyers - high employment, decent purchasing power and very low mortgage rates – remained a source of support for the housing market through to May while a shortage of properties has also supported house prices,” said Howard Archer, chief UK and European economist at IHS Global Insight.

“However, housing market activity has slowed overall after being buoyed in the first quarter by buy-to-let and second home sectors rushing to beat April’s stamp duty increase for these sectors.”

Archer said prices look to be at a “very serious risk” of an extended, marked downturn following the UK’s vote to leave the EU. Even with the Bank of England's expected interest rate cut in August and the shortage of properties on the market, he expects house prices will fall by up to 5% over the second half of 2016 and by another 5-7% in 2017.

Jonathan Hopper, managing director of buying agents Garrington Property Finders, said the May ONS data offered a “scant insight” into what’s going on in today’s property market.

He said, “the pre-referendum market it portrays – in which steady price rises were underpinned by strong demand and limited supply – now feels a world away”.

“The vote for Brexit plunged the market into a ‘hard reset’ in which both buyers and sellers took a step back and considered their positions.

“Many buyers have become very cautious and are asking for big price reductions – and vendors who have to sell are starting to offer discounts, often big ones.”