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June 4, 2010    

House price rises slow in May

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by Gill Montia

Nationwide’s latest house price index shows prices rising by 0.5% in May, taking the average value of a home to £169,162.

The increase leaves prices just 9.5% below their 2007 market peak, although the annual rate of inflation slipped back to 9.8% in May, down from 10.5% a month earlier.

Meanwhile, the more reliable three-monthly-on-three month rate of growth stood at 1.7%, up from 1.1% in April.

Nationwide’s chief economist, Martin Gahbauer, reckons that a shortage of properties for sale is continuing to under-gird the market.

Looking ahead, he comments: “The current supply-demand balance on the market is still consistent with relatively stable to modestly upward trending prices.”

However, Government plans to increase capital gains tax (CGT) on the sale of non-business assets could create a surge in new instructions should second-home owners and buy-to-let landlords rush to offload properties before a higher rate is introduced.

Analysts are suggesting that the CGT rate could rise from the current 18% to 40% or more, and Mr Gahbauer cautions: “Such a development could lead the supply-demand balance to shift more in favour of buyers.”

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