House prices rise by 2.6% to help boost recovery hopes

House prices rose by 2.6 per cent in May, the first increase in four months and the biggest jump since October 2002, this gives further hope that the market could be nearing the bottom, this is according to new figures from Halifax.

Last month’s increase takes the price of the average British home to just over £158,000, and compares to the 1.2 per cent price rise that Nationwide reported for May recently.

Read more: interserve administration

Halifax cautioned that it was “important not to place too much weight on any one month’s figures” and emphasised that the average UK house price in the three months to May was still 3.1 per cent lower than the figure for the previous 12 weeks.

Howard Archer, chief UK and European economist at IHS Global Insight, described the rise as a “real eye opener”, but said: “We remain sceptical that house prices have bottomed out.”

“Sharply higher and rising unemployment, very low wage growth and an unwillingness of many people to commit to buying a house when they still have serious concerns about the outlook are all factors that are likely to continue to weigh down on the housing market for some time to come.”

Last month’s house price rise represents an easing of the annual decline, the annual house price decline fell to 16.3 per cent in May, its lowest level since December, this compares to a 17.7 per cent annual decline in April and a 17.7 per cent drop at the peak in February.

The CIPS/Markit barometer’s headline reading climbed to 51.7 last month, from 48.7 in April, taking it above the key 50 mark that signals expansion.

The latest house price figures emerge a day after a survey suggested that the key services sector, which accounts for nearly three quarters of Britain’s GDP, grew last month for the first time in more than a year.

Growing signs that the economy’s slump could be easing mean that the Bank of England could pause this month in its aggressive eight-month campaign to jump-start economic growth.

It is widely expected that the Bank will keep the interest rate at the historic low of 0.5 per cent when it announces its decision at midday, and maintain its scheme to pump money into the economy at £125 billion, through a process known as quantitative easing.

Related Post