House prices up in May but post biggest annual fall in 1.5 years - Halifax

Published 07th Jun 2011

House prices inched up in May but fell at their sharpest annual rate in 1-1/2 years, figures from mortgage lender Halifax showed on Tuesday, in a further sign of weakness on the property market.

Halifax said house prices rose 0.1 percent on the month but fell 4.2 percent in the three months to May compared with a year ago -- the biggest fall since October 2009.

Analysts had forecast a rise of 0.2 percent for an three-month annual decline of 4.1 percent, after April's 1.4 percent monthly fall and three-month decline of 3.7 percent.

"The fact that Halifax reported that house prices could only rise fractionally in May after a particularly sharp drop in April reinforces our view that further weakness lies ahead in the face of ongoing muted housing activity and difficult economic fundamentals," said Howard Archer, economist at IHS Global Insight.

Britain's housing market has been slowing since the middle of last year and recent data show mortgage approvals -- a leading indicator of house prices -- fell in April to just half their long-run average before the financial crisis of 90,000 per month.

Halifax economist Martin Ellis said the housing market was coming under pressure from low earnings growth, higher taxes, rising inflation and concerns about the outlook for jobs and growth.

"These factors are probably constraining demand and applying some downward pressure on prices," he said.

However, he said a modest economic recovery and record low interest rates should help to stabilise prices later in the year.

The Bank of England has held interest rates at 0.5 percent for more than two years and is expected to leave them on hold until around the turn of the year amid signs that the economic recovery is losing steam.

The weak housing data came after a survey overnight showed retail sales unexpectedly fell in May as consumers tightened their belts after splashing out in April. Sales of household goods have been particularly hard hit by slowing house prices.

Halifax said the average price of a home stood at 160,519 pounds in May.

Source: ' Reuters '

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