House price rises slow with inflation squeeze

ANNUAL house price growth cooled down further in May, official figures show.

Average house prices in the UK rose by 4.7% in the year to May, down from 5.3% in the year to April, according to the figures released jointly by the Office for National Statistics (ONS), the Land Registry and other bodies.

The average UK house price was £221,000 in May, marking a £1,000 increase on the previous month.

The report said the annual price growth rate has slowed since the middle of last year, but has remained broadly around 5% during this year.

England continues to be the main driver of house price growth, with a 5% annual increase taking average values there to £238,000. Wales saw prices rise by 3.8% over the previous 12 months to an average of £150,000. In Scotland, the average house price rose by 3.5% over the year to stand at £143,000, and the average property value in Northern Ireland was £124,000, a rise of 4.3% over the year.

Across the regions of England, the east showed the highest annual growth, with prices rising by 7.5% in the year to May, followed by the East Midlands with a 7.2% increase. The lowest annual growth was in the North East, where prices rose by 1.6% over the year, followed by London at 3%.

Richard Snook, a senior economist at PwC, said it expects the market to soften.

He said: “We expect London to be one of the UK’s worst-performing regions, achieving price growth of just 2.8% in 2017. The key drivers of this slowdown are uncertainty related to Brexit and a softening in the economic outlook.”

Howard Archer, chief economic adviser at EY Item Club, said: “House prices look unlikely to rise by more than 2% over 2017. House prices are expected to be essentially flat over 2018. The fundamentals for house buyers are likely to deteriorate further over the coming months with consumers’ purchasing power continuing to be squeezed by inflation running higher than earnings growth.”