UK house prices rise more than expected in May, Halifax data shows

UK house prices rose more than expected in May as demand continued to outstrip supply, according to Halifax on Tuesday.

Prices increased 0.6% in May compared to a month ago, beating analysts’ estimates for a 0.3% gain.

House prices had fallen 0.8% month-on-month in April after surging 2.2% in March as buy-to-let investments rushed to beat higher stamp duty charges. The government introduced a 3% increase in stamp duty on 1 April for buy-to-let and second home purchases.

"There may be mayhem in the market, in the form of recent stamp duty changes and the forthcoming referendum, but the May index once again underlines how the imbalance between supply and demand is holding prices up,” said Mark Posniak, Managing Director at Dragonfly Property Finance.

Halifax also revealed house prices in the three months to May rose 1.4% quarter-on-quarter, slightly below April’s 1.5% growth and the lowest since November 2015.

On a year-on-year comparison house prices in the three months to May jumped 9.2%, in line with April’s increase and better than the 8.9% gain analysts had expected.

Halifax said while London continued to dominate the country’s most expensive property locations, five areas outside southern England fetched a higher property price per square metre than the national average of £2,216. The areas include Solihull and Leamington Spa in the West Midlands, Altrincham in the North West, Scotland’s capital, Edinburgh, and Harrogate in Yorkshire.

Howard Archer, chief UK and European economist at IHS Global Insight, said while he expects house prices will be soft over the next few months.

“The strong suspicion is that housing market activity will be pressurized in the immediate term by a combination of weakened interest from the buy-to-let and second home sectors as well as heightened concerns and uncertainties over the UK economic outlook, particularly in the run-up to June’s referendum on EU membership,” he said.

“Nevertheless, we expect housing market activity to regain limited momentum in the latter months of 2016 on the assumption that a vote to stay in the EU reduces uncertainty and supports a pick-up in economic activity. High employment, decent purchasing power and the probability that interest rates will not rise for some considerable time to come (and highly unlikely in 2016) should underpin house buyer interest.”