HOUSE prices unexpectedly rose by 2.6 per cent in May at their fastest monthly rate since October 2002, according to Halifax’s house price survey released yesterday, although economists warned that house prices still had some way to go before bottoming out.
Last month’s rise soundly beat analysts’ expectations of a fall of one per cent and puts the annual change in the average price of a UK house at -16.3 per cent, much less than the -17.7 per cent recorded in April.
Earlier this week the Bank of England reported that mortgage approvals had risen last month and Nationwide and Hometrack surveys also suggested that conditions in the housing market are starting to ease.
But Halifax cautioned against reading too much into one month’s figures and warned that house sales remain substantially below their long term average and market conditions are expected to remain difficult with housing activity continuing at low levels over the coming months.
Economists were fundamentally in agreement, remaining sceptical that house prices have bottomed out. Seema Shah, property economist at Capital Economics, said that the recent rise is simply a pause for breath and the market remains overvalued.
Mortgage approvals are still around half the level which historically has been consistent with stable house prices and further expected rises in unemployment and credit constraints will continue to weigh on the sector.
Howard Archer, chief economist at IHS Global Insight, said: “We believe that the pick up in actual house purchases is likely to be be gradual and fitful for some time to come. Despite the robust Halifax and Nationwide data for May, we are sticking to our forecast that house prices will fall by another 10 per cent from current levels to trough around mid-2010.”