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UK house price annual growth rate slowed in May, Nationwide says



From the section Business

houses in Moscow, Scotland
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The annual rate of UK house price growth cooled further in May, after slowing the previous month, according to the Nationwide building society.

The annual rate of house price growth was 4.7% in May, down from 4.9% in April and 5.7% in March.

In May alone, house prices rose by 0.2%, the same as the previous month.

The Nationwide said one factor was that many people had rushed to buy houses in March because of stamp duty changes that took effect on 1 April.

Further evidence of the drop off in activity following the peak in March came in UK mortgage figures from the Bank of England.

There were 66,250 home loans approved for house purchases in April, an 11-month low and down on the average of 71,075 over the previous six months, the figures showed.

The volatility generated by the stamp duty changes - which added a surcharge for buy-to-let investors and the owners of second homes - made it difficult to gauge the underlying strength of activity in the housing market, said Nationwide chief economist Robert Gardner.

"House purchase activity is likely to fall in the months ahead, given the number of purchasers that brought forward transactions," he added.

"The recovery thereafter may also be fairly gradual, especially in the [buy-to-let] sector, where other policy changes, such as the reduction in tax relief for landlords from 2017, are likely to exert an ongoing drag.

"Nevertheless, healthy labour market conditions and low borrowing costs are expected to underpin a steady increase in housing market activity once stamp duty-related volatility has passed, providing the economic recovery remains on track."

Rising costs

House keys

The Nationwide said that the cost of the average home in the UK had risen to 204,368. Such a sum is creating difficulty for many potential first-time buyers to get on the housing ladder despite the relatively low cost of mortgages.

"Affordability is a massive issue in many areas of the country, particularly the capital, but it is being counterbalanced to an extent by continued low borrowing costs," said Mark Posniak, managing director at Dragonfly Property Finance.

"What is hard to deny is that the result of the EU referendum could have a material impact on house prices in the short to medium term.

"What happens in June could determine the fate of the market for several years to come."

There have been claims and counterclaims by the two sides in the referendum debate over how house prices have been and would be affected in relation to the UK's position in Europe.

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