House prices in May were 6.9% higher on an annual basis according to latest data from the Halifax. This was the largest increase in the annual rate of change – measured by the average for the latest three months against the same period a year earlier – since October 2007.

However, house prices are 8.3% above their April 2009 trough despite the modest decline over the past two months. The average house price is now £167,570; 16% below its August 2007 peak.

On a seasonally adjusted basis, home sales in the UK fell by 18% between 2009 quarter 4 and 2010 quarter 1. (Source: HMRC.) This decline followed three consecutive quarterly increases from the low in 2009 Q1. Sales in 2010 quarter 1, at 214,000, were 27% higher than in the same quarter of 2009, but were still less than half the number in 2007 quarter 1 (439,000). The return of the lowest stamp duty threshold to £125,000 at the start of the year and bad weather in January and February affected both the overall level, and the timing, of activity during late 2009 and early 2010. It is therefore difficult to gauge the degree to which the fall in sales in quarter 1 represents a trend and how much is due to these temporary factors.

Commenting, Martin Ellis, Halifax housing economist, said: “House prices fell by 0.4% in May. This followed April’s 0.1% decline. The mixed pattern of monthly price rises and falls so far this year is consistent with a slowing market and is in line with our view that house prices will be flat during 2010 as a whole.

The relative recovery in house prices in 2009 was driven by a boost to demand from reduced interest rates combined with a lack of properties for sale. These factors have lost some momentum in recent months. Further falls in the number of people in employment are curbing housing demand whilst the pickup in market conditions last year has encouraged more homeowners to attempt to sell their property.”

SOURCE: HouseFund