Upward house price trend shows signs of slowing, warn economists

5 July 2010 | By Natalie Thomas

House prices saw their first monthly fall since March 2009 in May, with economists warning the recent trend in house price rises may be running out of steam.
Figures from the Land Registry show prices dropped by 0.2% in May.

This represents the seventh consecutive month the annual figure has risen but the first monthly decline since 2009.

The average England and Wales property price is now £165,314, with all regions seeing rises in the past 12 months.

David Smith, senior partner at property consultancy Carter Jonas, says: “The May statistics are indicative of a market that is beginning to harden. “Sought-after properties in desirable locations may see more rises but those in certain areas could see falls.”

Last week the Bank of England revealed that house purchase approvals went down marginally in May.

There were 49,815 loan approvals for house purchase in the month, lower than the 49,828 seen in April and below the previous six-month average of 51,856.

Vicky Redwood, senior UK economist at Capital Economics, says the figures provide further evidence that the market recovery is slowing.

She says: “Weak activity has not stopped prices rising over the year but there are tentative signs that they are running out of steam. I think the market will weaken in the second half of the this year.”

But according to Nationwide Building Society, prices have gone up by 3% in the first half of 2010.

It noted a rise of 0.1% in June, slightly down on the 0.5% boost in May. The annual rise slowed for the second consecutive month, to 8.7%.

Martin Gahbauer, chief economist at Nationwide, says: “Demand has stayed fairly stable, which could in part explain the recent slowdown in the rate of price inflation.”

If you enjoyed this article, sign up here to receive daily email updates from Mortgage Strategy and Follow @mortgagestrat