House prices register May dip

House prices dipped by 0.4% in May, following a 0.1% decline in April, Halifax has reported.

However, taking an average of the latest three months, the value of the typical home increased 6.9% on the same period of 2009, reflecting the biggest annual rate of change since October 2007 (8.9%).

Prices are therefore 8.3% above their April 2009 trough, at an average £167,570, or 16% below their August 2007 peak.

With 2010 so far seeing a mixed pattern of monthly rises and falls, the lender suggests the market is slowing, having previously been boosted by low interest rates and a lack of properties for sale.

Rising unemployment and an increase in new instructions for sale are blamed for a downward pressure on prices and Halifax warns that the recent suspension of Home Information Packs and uncertainties about changes to Capital Gains Tax could result in more properties being put up for sale.

The lender is therefore sticking with its forecast that house prices will remain flat during 2010 as a whole.

By way of comparison, 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 peak, although the annual rate of inflation slipped back to 9.8% in May, down from 10.5% a month earlier.

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

Based on the current supply-demand balance, the building society considers that the market can still produce “relatively stable to modestly upward trending prices”.

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