UK house prices rose for the first time in five months in May as buyers were spurred on by a shortage of homes and low mortgage rates.
The average price increased by 0.4% last month to £220,706, according to Halifax. It was the first monthly rise in house prices since the beginning of 2017 and surprised City economists, who had forecast a 0.1% fall.
House prices went up in May despite uncertainty surrounding the upcoming Brexit negotiations and general election, and a tougher outlook for household finances, which are being squeezed as inflation outpaces wage growth.
Martin Ellis, a housing economist at Halifax, said Britain’s property shortage was a key factor underpinning prices.
“The fact that the supply of new homes and existing properties available for sale remains low, combined with historically low mortgage rates and a high employment rate, is likely to support house price levels over the coming months,” he said.
However, the longer-term trend was weaker, with the annual growth rate in house prices the slowest in four years at 3.3%, and sharply lower than the recent peak of 10% in March 2016. Prices fell by 0.2% over the past three months.
Samuel Tombs, the chief UK economist at Pantheon Macroeconomics, said a shortage of properties would prevent a serious downturn in the housing market.
“May’s Halifax data should allay concerns that house prices are on a downward spiral,” he said.
“The extremely low rate of job losses means that few homeowners are being forced to sell their homes and many are deciding to delay listing their homes until the market strengthens again.
“While the days of rapid house price growth fuelled by sharp increases in leverage are over, we still see scope for prices to edge up over the rest of 2017.”