House prices up 2.6% in May

05 June 2009 / by Rachael Stiles
Following three successive monthly falls, house prices rose 2.6 per cent in May, according to the latest house price index from Halifax.

While this marks the most significant increase in house prices for many months – according to calculations by the Daily Mail it marks the biggest monthly rise in seven years – Halifax is warning against taking too much optimism from last month's house prices.

The previous three months saw falls of between 1.8 per cent and 2.3 per cent, so May's results should be taken with a pinch of salt as they are still down 16.3 per cent on an annual basis, Halifax emphasises.

"It is always important not to place too much weight on any one month's figures," said Nitesh Patel, housing economist at Halifax. "Historically, house prices have not moved in the same direction month after month even during a pronounced downturn. For example, prices fell by 11% nationally during 1991 and 1992, but there were five monthly price rises in this period."

It might be too soon to interpret May's house prices as evidence of a turn around in the housing market, but it is a significantly different picture to the that seen in the second half of 2008, when falls of five or six per cent were recorded consistently between June and January 2009.

But the figures do give cause for cautious optimism, Mr Patel said, when they are considered alongside recent data from the Bank of England, which shows mortgage approvals rose 19 per cent during the last quarter of 2008 and the first quarter of 2009.

"There are some tentative indications of a possible stabilisation in activity, albeit at a low level," he said, because March's mortgage approvals were still down 45 per cent on the same period the year before, and house sales remain substantially lower than their long-term average, which is expected to continue.

Peter Bolton King, chief executive of the National Association of Estate Agents (NAEA), is encouraged by May's figures. "This is one more indicator that the pent-up demand in the housing market is beginning to move," he said. "Our agents are reporting increased sales, more people wanting to look for property and a healthy resurgence in first time buyers."

But he also remains wary about being too optimistic: "it would be silly to speak as if the property market has recovered," he warned. "The Government must do everything in its power to help ensure that this is not a bubble. Specifically they must re-examine stamp duty, which is a tax on aspiration and a barrier for thousands of first time buyers."

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