House Prices Up 0.3% - Nationwide

House Prices Up 0.3% - Nationwide
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House prices increased by 0.3% month-on-month in May to reach another record average high in cash terms, Nationwide Building Society has reported.

UK property values increased to £195,166 on average, surpassing an all-time high of £193,048 the previous month.

April was the first time Nationwide had recorded typical UK house prices over the £190,000 mark.

But the figures showed house price growth has slowed down, at 4.6% higher in May than a year earlier, slowing from an annual growth rate of 5.2% in April.

The 0.3% month-on-month increase follows 1% monthly growth in April.

Robert Gardner, Nationwide's chief economist, said the slowdown resumes a gradual downward trend that started in summer last year but was briefly interrupted in April when growth accelerated.

He said: "Annual house price growth is now running at less than half the pace prevailing in mid-2014.

"Over the longer term we would expect house price growth to converge with earnings growth, which has typically been around 4% per annum.

"However, much will depend on supply side developments - in recent years the rate of building activity has remained well below that required to keep up with population growth."

Mortgage lenders have been offering some of their lowest ever rates in recent months and Bank of England figures released yesterday showed the number of mortgage approvals made to home buyers lifted to a 14-month high in April.

But Mr Gardner said Nationwide estimates that the share of cash purchases in the housing market reached an all-time high of 38% in the first quarter of 2015.

He said: "Continued healthy demand from cash buyers has helped to support transaction levels in recent quarters, since mortgage lending has remained relatively subdued.

"Though the 38% share was a record, it was only modestly above the average of 36% prevailing in 2014. The significant rise in the share of cash transactions occurred in the wake of the financial crisis, where a tightening in credit conditions and a deterioration in the labour market limited the number of people able to buy with a mortgage."

Mr Gardner said the low interest rate environment in recent years, which has resulted in poor returns for savers, is likely to have supported the flow of investors' cash into property.