House prices increased by 2.2% in May taking the average UK house price to £157,849, the latest Halifax house price index reveals.
The survey also shows that the number of first-time buyers as a percentage of all homebuyers dropped back to 28% after successive increases in February and March. This proportion remains well below the long-term historical average of nearly 50%. The total number of first-time buyers is likely to remain low this year following a 33% drop in 2003 to 355,000 due to the difficulties many potential first-time buyers are facing in getting onto the housing ladder.
Halifax says it expects the housing market to begin to slow later in the year and into 2005 and that the cumulative effect of the increases in interest rates since November alongside other potential increases this year should constrain housing demand. It says the increasing difficulties that face aspiring first-time buyers should also exert downward pressure on housing demand, including in the North where there has been rapid house price growth in recent years.
Martin Ellis, chief economist at Halifax, says: “Strong housing demand, together with supply shortages, is maintaining house price inflation at a high level. The market has remained strong in northern England and Wales so far this year and house price inflation in the South has picked up following a significant slowdown during 2003. We expect the North and Wales to continue to outperform the rest of the country over the remainder of the year, resulting in a further narrowing in the North/South divide.
Higher interest rates and the increasing difficulties that face aspiring first-time buyers should, however, exert downward pressure on house price inflation later in the year and into 2005, including in the North where there has been rapid house price growth in recent years.”