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House prices surge 2.6 per cent

House prices surge 2.6 per cent

Category: Mortgages

Updated: 04/06/2009
First Published: 04/06/2009

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This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.
UK house prices recorded a welcome rise of 2.6 per cent in May, following three successive months of falls.

The figures from The Halifax House Price Index are further signs that the housing market may be making a slow but concerted recovery, although experts have warned that long term conditions are still likely to be particularly challenging.

The average price of a property in the UK at the end of May was £158,565, an annual decrease of 16.3 per cent.

In the three months to May, prices fell by 3.1 per cent but the rate of decline seems to be reducing; between June last year and January, the fall was consistently between five and six per cent.

A three month recording is often considered a better indicator of trends in the sector.

Nitesh Patel, housing economist at Halifax, warned: "Historically, house prices have moved in the same direction month after month even during a pronounced downturn. For example, prices fell by 11 per cent nationally during 1991 and 1992, but there were five monthly price rises in this period."

He continued: "House sales remain substantially below their long term average and market conditions are expected to remain difficult with housing activity continuing at low levels over the coming months."

However, some encouragement can be taken from a decline in the house price to earnings ratio, which is now at a level not seen since January 2003. Lower interest rates have also made property more accessible.

This has been borne out by data from the Council of Mortgage Lenders that shows 40 per cent of those purchasing a home in March were first time buyers, although the actual number – 12,500 – remains historically low.

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