Tiny rise in house prices is yet another indication that economy is stagnating

Published 27th May 2011

House prices edged ahead by 0.3 per cent during May as the property market continued to trade sideways, figures showed today.

The rise, which offset April's 0.2 per cent fall, left the average home costing £167,208 - 1.2 per cent less than a year earlier, according to Nationwide Building Society.

Robert Gardner, Nationwide's chief economist, said: ‘Overall, the modest pace of house price growth in May suggests that the property market is continuing to mirror the lacklustre trends evident in the wider economy.’

The quarter-on-quarter change, which is generally regarded as a smoother indicator of housing market trends, was broadly stable, with prices rising by 0.6 per cent during the three months to the end of May, compared with a 0.7 per cent rise during the previous three-month period.

House prices have now risen during five of the past 12 months, while they have remained unchanged in three of them and fallen in four, as the market struggles for direction.

Nationwide said the modest improvement in economic conditions had so far been insufficient to pull the property market out of its ‘torpor’, with household budgets remaining under pressure due to high debt levels and inflation rising at twice the pace of wage increases.

It added that, although the house price to earnings ratio, a key measure of affordability, was now well below the peak levels seen in 2007, it remained above the long-term average.

The group said that, while the economic outlook remained uncertain, house prices were likely to trade sideways for the rest of the year.

The latest figures come after the property market endured a difficult month in April, as people put moving plans on hold while they enjoyed the extended bank holiday weekends.

Halifax reported a 1.4 per cent price slide during the month, while the Council of Mortgage Lenders said lending levels dived by 14% compared with March.

But a report by the National Association of Estate Agents was more upbeat, saying sales levels remained stable during the month at an average of eight per branch.

Source: ' ThisIsMoney '

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