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House prices rise 1.2% in May

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House prices have risen for the second time in three months, but have we seen the bottom of the market?

The price of a typical house rose by 1.2% in May and is now £154,016, according to figures from Nationwide (www.nationwide.co.uk).

It is the second time in three months that house prices have risen, with the average price also increasing by 1% in March, and falling just 0.3% in April.

The latest figures show a dramatic improvement in the annual rate of decline, from 15% recorded in April, to 11.3% now.

Martin Gahbauer, Nationwide’s chief economist, said that the figures do provide evidence of “some improvement in housing market conditions” but stressed that it is “still too early to say that the market is turning definitively.”

He said that the recent improvement in prices was likely to have been caused by a reduction in the number of properties coming onto the market. This could be due to a combination of fewer homes being built, potential sellers holding back for fear of getting an unsatisfactory price and many sellers choosing to rent their properties instead.

He drew a comparison with the downturn of the 1990s when “there were many months during which prices rose, only to fall back down again in subsequent months,” and added that the current combination of rapidly rising employment and tight access to credit “implies that the last of the price declines has probably not been seen yet.”

Chris Eagle, commercial manager at CreditChoices.co.uk, advises those looking to get their first foot on the property ladder to concentrate on saving up as big a deposit as they can manage and to consult an independent mortgage broker for guidance on when to buy.

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