House Prices remained virtually static in May, rising by just 0.1%, according to figures released by the Halifax.
The figures support those reported by the Nationwide building society last week, which announced a small rise of 0.3% in May.
The 0.1% rise follows on from a 1.4% decrease in April, but the quarterly change – the preferred measure of movement because the longer time period smoothes out blips in performance – is -1.2% down, while prices fell by -4.2% during the year, the sharpest year-on-year drop since October 2009. This leaves the average house price in the UK at £160,519.
Martin Ellis, housing economist for the Halifax, said: “House prices continue to drift modestly downwards as measured by the underlying trend. Low earnings growth, higher taxes and relatively high inflation are all putting pressure on household finances.
“Confidence is also weak as a result of uncertainty about the economic and employment outlook. These factors are probably constraining housing demand and applying some downward pressure on prices.
“Overall, we expect a moderate improvement in the economy during the remainder of 2011, which combined with continuing low interest rates is likely to support housing demand. This should prevent a further marked fall in prices and help to stabilise property values later in the year.”
Ellis said figures produced by Rics show there had been a modest improvement in the balance between supply and demand, with the number of house sales rising compared to the number of unsold properties on estate agents’ books. But the number of sales in the first four months of 2011 is 5% lower than the same period last year – 279,000 compared to 293,000, according to figures from HMRC.
Other economists are more pessimistic about the state of the housing market, expecting a further decline in prices throughout the rest of this year.
Howard Archer from IHS Global Insight said: “The fact Halifax reported that house prices only rose 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.
“We maintain the view that house prices are likely to end up declining by some 10% overall by mid-2012 from their 2010 highs. This implies they will fall by around 5%-8% from current levels, depending on which measure you take.”