Halifax has warned that property supply and demand imbalance is likely to push up house prices over the coming months, as its house price index reveals that annual prices grew by almost 9 per cent in the 12 months to May.
Halifax’s house price index, published today (4 June), revealed that house prices edged down by 0.1 per cent between April and May, however over the year, they rose to 8.6 per cent from 8.5 per cent in the preceding month. Last month, the average property price was £196,067.
Halifax said generally house prices have stayed in the narrow range of 8 to 9 per cent so far this year.
The data also showed that mortgage approvals have continued to pick-up. The volume of mortgage approvals for house purchases – a leading indicator of completed house sales – increased by 9.9 per cent in April.
Whilst approvals in the three months to April were 6.6 per cent higher than in the preceding three months, they were 4.3 per cent lower than in the same three months a year ago.
However, property supply remains tight. The stock of homes available for sale fell further in April and is currently at its lowest level for many years.
New instructions declined in April for the eighth month in the last nine, contributing to the very low levels of supply, Halifax said.
Halifax’s latest market tracker, published earlier this week, showed that confidence in the housing market dented slightly last month, despite the fact that interest rates were held at the record-low 0.5 per cent again last month and average house prices continued to climb.
Martin Ellis, Halifax’s housing economist, said: “Housing supply remains extremely tight with the stock of properties available for sale currently at its lowest level for many years.
“At the same time, ongoing economic recovery, increasing employment, real earnings growth and very low mortgage rates are all supporting housing demand. This combination has kept annual house price inflation well above earnings growth although activity levels are subdued.
“The imbalance between supply and demand is likely to continue to push up house prices over the coming months. Looking further ahead, the increasing level of house prices in relation to earnings is expected to dampen house price growth.”