Although the rate of house price increase appears to be slowing, as indicated by the latest Halifax house price index showing a 0.1% decline in prices between April and may 2015, on a three monthly basis prices are still rising. When looking at house prices on an annual basis prices are increasing at about 8-9 percent, which is far faster than earnings growth and the CPI.
That Halifax reports that in the three months to May 2015 house prices increased by 2 two percent when compared to the three months to February 2015, with the price of an average house now being £196,067.
Although the Bank of England, seasonally-adjusted figures shows that the number of mortgage approvals rose by 9.9 percent in April, which is a leading indicator of completed house sales, and were higher by 6.6 percent when comparing the three months to April with the three months to January, the number of approvals in the three months to April were still down 4.3 percent on the same period last year.
There is also the matter of supply, Halifax cites the Royal Institution of Chartered Surveyors (RICS) monthly report saying that housing supply remains tight with available stock numbers ‘…fell further in April and is currently at its lowest level for many years’.
But confidence remains high for potential purchasers according to the Halifax Housing Market Confidence Tracker with the proportion of consumers who believe the next 12 months will be a good time to buy increased from +21 in March to +26 in April. Whereas those who thought it a good time to sell fell from +33 to +30. But the proportion of those who thought prices would rise as opposed to fall fell from +64 in March to +58 in April.
Commenting, Martin Ellis, Halifax housing economist, said:
"House prices in the three months to May were 2.0% higher than in the preceding three months. This measure of the underlying rate of house price growth eased for the second consecutive month, falling to its lowest since January. Annual house price growth, however, rose marginally from 8.5% in April to 8.6% and continues to be in the narrow range of 8-9% where it has been throughout 2015 so far.
“Housing supply remains extremely tight with the stock of properties available for sale currently at its lowest level for many years. At the same time, ongoing economic recovery, increasing employment, real earnings growth and very low mortgage rates are all supporting housing demand. This combination has kept annual house price inflation well above earnings growth although activity levels are subdued.
”The imbalance between supply and demand is likely to continue to push up house prices over the coming months. Looking further ahead, the increasing level of house prices in relation to earnings is expected to dampen house price growth.”