The Halifax House Price Index released today (7 June 2016) showed a slight rise in house prices in May, taking the average to £213,472.
Prices in the past three months also rose by 1.4% compared to the preceding three months (December 2015-February 2016). This was slightly below April’s 1.5% and was the lowest since November 2015 (1.4%).
Martin Ellis, Halifax housing economist, said:
“House prices in the three months to May were 1.4% higher than in the previous quarter. The annual rate of growth was unchanged at 9.2% – the lowest since last autumn.
“Low interest rates, increasing employment and rising real earnings, continue to support housing demand. The strength of demand, combined with very low supply, is causing house prices to rise at a brisk pace in quarterly and annual terms.
“Increasing affordability issues, caused by a sustained period of higher-than-earnings house price growth, should curb housing demand and result in some slowdown in house price growth as the year progresses.”
The Index also showed home sales dropped substantially after the introduction of new higher stamp duty tax rates for buy to let and second homes. Sales fell by 45% from 153,700 in March – the highest monthly total since records began in April 2005 – to 84,300 in April – the lowest since March 2013.
Stamp duty change is also affecting mortgage approvals, according to the report. The volume of mortgage approvals for house purchases – a leading indicator of completed house sales – fell by 5.8% between March and April.
Approvals were 2% lower than in April 2015.
Supply remained very low. New instructions by home sellers fell for the second consecutive month in April. This contributed to a rise in the stock of homes available for sales as market conditions remain very tight. New housing starts in England fell in 2016 Quarter 1 and were 3.4% lower than in the previous quarter and 8.6% down on 2015 Quarter 1. Housebuilding is being held back by material and labour constraints.