House prices show slight increase

House prices showed a slight increase last month but are unlikely to move much over the rest of this year, the Halifax said today.

Prices rose by 0.5% month-on-month across the UK in May, following a 2.3% monthly fall in April, to reach £160,941 on average, the bank added.

In the three months to May, house prices were 0.8% higher than between December 2011 and February this year, marking the biggest increase over three months since last August.

Halifax housing economist Martin Ellis said that while there has been a "modest improvement" in prices recently, they are still very similar to those a year ago when they were 0.1% lower.

He said: "We expect this situation to continue, with prices likely to still be around today's levels at the end of 2012 as the ongoing tough economic environment constrains housing demand.

"Recent monthly house sales figures have clearly been affected by the ending of the stamp duty holiday for first-time buyers in late March. Overall, the trend for sales - like that for prices - appears to be one of broad stability."

The study said that prices are holding up to some extent due to low numbers of homes on the market, helping to strengthen demand.

But it pointed out that the recent ending of a stamp duty concession for first-time buyers in March has already brought forward much of this year's sales activity as people rushed to beat the deadline.

The ending of the concession was followed by a sharp drop off in transactions, as sales fell by 18% between March and April according to HM Revenue and Customs figures.

Borrowers also face a tougher time taking out a mortgage in the coming months, as lenders are tightening their credit criteria amid the uncertain economy.

Several lenders raised their mortgage rates last month, affecting more than a million borrowers, blaming the weak economy and the increased cost of funding a mortgage.

Analysts have said that the ongoing eurozone crisis and high unemployment will act as further constraints on prices.

Howard Archer, chief UK and European economist for IHS Global Insight said: "The housing market may well be hit in the near term at least by substantial consumer concern over the economic outlook with the UK currently back in recession.

"Serious worries over the situation in the eurozone and how this could hit the UK economy may well also lead to increased caution over buying a house."

PA