House prices rose by 1.5% in May according to Halifax, partly reversing a steep fall the month before, but leaving average values flat over the year so far.
On a quarterly basis, house prices were up just 0.2% in the three months from April to May compared to the previous quarter, while the annual inflation rate stood at 1.9%.
Monthly data from Halifax has been extremely volatile this year, with parts of the London market experiencing plunging prices but other regions still reporting growth.
In April Halifax reported that prices dropped by 3.1% on the month alone, the steepest monthly fall since 2010. May’s rebound has prompted widespread relief among estate agents and took the average price for a home in the UK to £224,439.
“The Halifax house price index has been all over the place in recent months but the underlying performance has clearly been soft,” Howard Archer, the chief economist at EY Item Club, said. “The housing market is struggling to gain traction amid challenging conditions and we suspect that any meaningful upturn will remain elusive over the coming months.”
Sellers are becoming more realistic about the price their property is going to fetch, said Jonathan Hopper, the managing director of Garrington Property Finders. “Crucially, most sellers have jettisoned the unrealistic price expectations fostered by the market’s seemingly endless rise, and the homes being listed for sale are now much more sensibly priced,” he said.
Halifax said that newly agreed sales and new buyer inquiries are showing signs of stabilisation, sparking relief among estate agents.
Russell Quirk of the online estate agency Emoov said: “Sellers who were previously sitting on the fence are now starting to take action and adjust their expectations in line with current market conditions in order to secure a sale. As more continue to do so, we should see further stability return and the erratic price trends of previous months begin to evaporate.”
Halifax is confident that low interest rates, high employment levels and real earnings rises will support future house price rises.
The Halifax managing director, Russell Galley, said “The continuing strength of the labour market is supporting house prices. In the three months to March the number of full-time employees increased by 202,000, the biggest rise in three years.
“We are also seeing pay growth edging up and consumer price inflation falling, and as a result the squeeze on real earnings has started to ease. With interest rates still very low we see mortgage affordability at very manageable levels providing a further underpinning to prices.”