House prices up 4.7%

Average house prices rose by 0.2% from April to May from £202,436 to £204,368 on a seasonally adjusted basis.

Annual house price growth stood at 4.7% in May 2016 – down from 4.9% the month before, Nationwide’s House Price Index has revealed.

Average house prices rose by 0.2% from April to May from £202,436 to £204,368 on a seasonally adjusted basis.

With the 3% stamp duty surcharge on buy-to-let and second homes coming into force on 1 April Nationwide’s chief economist Robert Gardner said it’s difficult to gauge the strength of the housing market due to the volatility that created.

He added: “House purchase activity is likely to fall in the months ahead given the number of purchasers that brought forward transactions.

“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.

“However, it is possible that the recent pattern of strong employment growth, rising real earnings, low borrowing costs and constrained supply will tilt the demand/supply balance in favour of sellers and exert upward pressure on price growth once again in the quarters ahead.

“According to RICS, the number of properties on estate agents’ books was already close to all-time lows on data extending back to the late 1970s.”

Mark Posniak, managing director at Dragonfly Property Finance, called the index “surprisingly upbeat”.

He said: “The broader prognosis given by the Nationwide, specifically that the market could favour sellers, is out of sync with the doom-mongering of various property market commentators.

"The volatility caused by the recent stamp duty changes on buy-to-let and second homes, coupled with the EU referendum this month, has certainly made 2016 a difficult year to predict.

“The perennial issue of weak supply has the potential to act as a glass floor under house prices.

"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.”

Posniak looked ahead to the EU referendum on 23 June, adding: "What's 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."