House prices up in May - but pace slows

HOUSE prices rose by 0.5 per cent in last month, according to a survey by Nationwide.

The lender said the increase meant prices had risen 12.2 per cent since February 2009.

House prices have risen in 12 of the past 13 months on the Nationwide index, although the pace of growth appears to be slowing.

May's increase followed an upwardly revised 1.1 percent jump in April and a one per cent rise in March.

The rebound in property prices over the past year has been fuelled by record low interest rates and limited supply.

Martin Gahbauer, Nationwide's Chief Economist said current supply and demand dynamics were consistent with "relatively stable to modestly upward trending prices."

He said the future outlook for the market could depend on the government's plans to increase capital gains tax.

"If there is a significant time lag between the announcement of the increase and its actual implementation, then second home owners and buy-to-let landlords may decide to sell in advance," Gahbauer warned.

Britain's coalition government had pledged to raise capital gains tax closer to income tax, although precise details will not be known until the annual budget on 22 June.