May saw slight house price increase

House prices rose slightly in May, but the annual inflation rate was lower than in April, according to official figures published today.

Figures released by the Office of the Deputy Prime Minister (ODPM) showed that at the end of May the average house price stood at £182,651, up from £181,832 in April.

Annual house price inflation across the UK stood at 6%, down from 6.9% in April.

In London, the ODPM said annual house price inflation had fallen from 2.7% in April to 1.6% in May, while the average rate of price inflation for the three months to May was 4.6%. This compared with a three-month average of 8.4% for the UK as a whole.

The ODPM put the rise in prices between April and May down to increases in the prices of terraced and detached houses, which both rose in value by 1%. It said prices for flats had not moved, while the average prices for bungalows and semi-detached properties had fallen by 0.9% and 0.2% respectively.

Homes in London remained the most expensive in the UK. The average property price in the capital was £264,505 by the end of May, while at the other end of the spectrum homes in the north-east were worth an average of £130,474.

However, the ODPM said the north-east was among the regions with the highest year-on-year price rises. It said annual house price inflation in the region stood at 11.1% in May, not far behind the rates in Yorkshire and Humber (12.3%) and the north-west (12.2%). In the east, south-east and south-west the figure was between 3 and 4%.

The ODPM's monthly price index also showed that the average price paid by first-time buyers had increased by just 0.1% between April and May, compared with a rise of 2% over the same period last year.

The average price of a home bought by this group was £150,259 in May 2005, compared with the £197,313 paid by former owner occupiers.

Howard Archer, UK chief economist at consultancy Global Insight, said that the ODPM's figures reinforced the impression that house prices are continuing to moderate in a relatively steady and orderly fashion.

"We do not believe that last week's bombings in London will have a significant impact on the housing market," he said. "We continue to believe the housing market will see an extended period of relatively subdued activity and soft prices rather than undergo a sharp correction.

Mr Archer said that buyer affordability will benefit from annual house price inflation falling below annual earnings growth and a cut in rates. "Interest rates seem set to start falling in August," he said.

Nationwide and Halifax have already published their house price data for June. Nationwide reported a price fall of 0.2% during the month, and annual inflation of 4.1%, while Halifax said prices were up 0.1% over the month and 3.7% on June 2004.