House price growth at two-year low

The latest statistics from the Department for Communities and Local Government (CLG) find house price inflation is now at the lowest level for over two years.

CLG data finds prices grew 3.7 per cent year-on-year to May, down from 4.9 per cent in April.

Between April and May this year there was a fall of 0.3 per cent in the prices index of properties bought compared with a rise of 0.9 per cent over the same period last year, resulting in a decrease in the annual rate.

The figures – along with those released earlier today by the Council of Mortgage Lenders (CML), showing a moderate increase in lending – serve to present a relatively moderate picture of the property industry.

However, this largely goes against the grain of a host of other indicators.

While the CML argues gross mortgage lending has increased by two per cent between April and May, it remains 44 per cent below the same period of last year.

Similarly, the moderate price gains reported by the CLG lag behind the trend established by Nationwide – showing prices are now falling by an average of 6.3 per cent year-on-year in June.

The official government figures can be expected to head in this direction.

The moderate fall in prices recorded in between April and May can be attributed to decreases in average prices for detached houses (2.1 per cent), bungalows (one per cent), terraced houses (0.6 per cent) and semi-detached houses (0.4 per cent each).

However, the fall is offset by an increase in average prices for flats (3.2 per cent).

The average cost of a property in the UK according to CLG is now £218,151.

The average price paid by first-time buyers across the whole of the UK was £162,666 in May, while the average price paid by former owner occupiers was £251,075.

"The CLG data do little to dilute the serious concerns over the housing market, even though it shows house prices still rising year-on-year," explained Global Insight chief economist, Howard Archer.

"Severe downward pressure on house prices continues to come from very weak housing market activity, elevated affordability pressures on potential house buyers and very tight credit conditions.

"Elevated affordability pressures on potential house buyers stem from high house prices and modest disposable income growth, while very tight credit conditions are leading to markedly fewer and more expensive mortgages being available."

Chris O'Toole