Properties shortage pushes house prices higher

Published 03rd Jun 2010

A shortage of properties on the market continued to push house prices higher during May, figures have shown.

The average cost of a UK home rose by 0.5% during the month to stand at £169,162, according to Nationwide.


The increase, which followed gains of 1.1% and 1% in April and March respectively, came despite activity in the housing market remaining subdued.


Martin Gahbauer, Nationwide's chief economist, said: "Housing market conditions remain characterised by thin transaction volumes and a relative scarcity of properties for sale, despite a slow return of more sellers in recent months.

"The current supply-demand balance on the market is still consistent with relatively stable to modestly upward trending prices."

The group said house prices were now just 9.5% below the peak they reached in October 2007, having risen by 12.2% since they reached their trough in February last year.


But despite May's increase, the annual rate of house price growth edged back into single digits during the month to 9.8%, down from 10.5% in April.


Nationwide said the reduction had been caused by last month's 0.5% increase being below the 1.2% rise recorded in May 2009.


It added that the quarter-on-quarter growth rate, which is often seen as being a smoother indicator of market trends, rose to 1.7% during the three months to the end of May, up from 1.1% during the quarter to the end of April.


Activity in the housing market has been subdued since the start of the year, due in part to the end of the stamp duty holiday and uncertainty caused by the General Election.


But some economists have warned that the fall in activity cannot be attributed to these one-off factors alone, but rather indicates that the market recovery is running out of steam.


Many commentators expect house prices to remain flat over 2010 as a whole.
Nationwide warned today that the new Government's plans to raise capital gains tax from its current level of 18% could lead to an increase in the number of properties being put up for sale, if there was a significant time lag between the announcement of the higher rate and it being introduced.


It said this might encourage investment landlords to sell properties to take advantage of the lower rate, which could shift the current supply and demand imbalance in favour of buyers and reduce some of the upward pressure on prices.


But Mr Gahbauer added: "If the new rate comes into effect immediately on June 22, then supply conditions are unlikely to be affected materially as any potential sellers would not have time to react."

Source: ' Daily Mail '

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