Modest gains for house prices

HOUSE prices rose just 0.5 per cent in May on the previous month, indicating that after a sharp recovery, the UK property market is finally starting to level off.

The latest monthly figures from mortgage lender Nationwide revealed that house prices are now up 12.2 per cent from their trough last February and are less than 10 per cent below their 2007 peak.

Although sellers have been gradually returning to the market, housing market conditions remain characterised by thin transaction volumes and a relative scarcity of properties for sale. However, Martin Gahbauer, chief economist at Nationwide, said: “The current supply-demand balance on the market is still consistent with relatively stable to modestly upward trending prices.”

Ed Stansfield, chief property economist at Capital Economics, said: “For now, house prices continue to rise, but easing supply shortages, overvaluation and, of course, the weak economic backdrop, all argue for renewed falls later this year.”

He added: “With Wednesday’s weak net mortgage lending data also pointing to a renewed mood of caution among lenders, we find it hard to avoid the conclusion that the house price revival will ultimately prove unsustainable.”

Nationwide added that it was difficult to estimate the impact of any possible capital gains tax change.