UK house price growth slowed to 5.5 per cent in the year to May, according to data published today by the Office for National Statistics (ONS).
London’s market was particularly subdued, falling to 4.3 per cent – the capital's lowest figure since October 2012.
The growth was notably slower than the 9.6 per cent recorded in the year to April. As ever, the engine for price rises was in London and the South East – excluding these regions, the figure dropped to a more modest five per cent.
The average house price rose by 5.8 per cent in England, 1.3 per cent in Wales, 2.2 per cent in Scotland and 8.8 per cent in Northern Ireland.
The monthly (seasonally adjusted) figures showed prices fell by 1.3 per cent between April and May.
Why it’s interesting
The data makes it clear that the market is continuing on a steady path, with last summer’s highs looking like a surge rather than a prolonged trend.
That said, the ONS releases its data later than other indexes, and more recent indexes show the market is in a solid, but not spectacular, period of increases. Data from Rightmove – which uses asking prices rather than mortgage approvals – showed a 0.1 per cent drop in May followed by a robust three per cent jump in June.
Jonathan Samuels, chief executive of Dragonfly Property Finance, said the Rightmove figures were likely to be on the money.
As Rightmove showed earlier this week, asking prices have risen further and it's hard to see this trend reversing with so few properties coming onto the market.
It said London’s impressive growth this month was driven partly by an alleviation of fears over the mansion tax.
What the analysts said
Howard Archer of IHS Global Insight said the ONS figures should be taken in the context of more bullish recent data:
We currently expect house prices to increase six per cent in 2015 (which is an upward revision of our previous forecast of a five per cent rise). We currently see house prices rising by around five per cent in 2016. There is an upside risk to these forecasts coming from the current lack of properties coming on to the market
More recent figures show a London rebound, but it will be interesting to follow the ONS’s data to see how the measures align.