British house prices saw a notable rise in May, according to recent data from mortgage lender Nationwide. Prices were 3.5% higher than the same time last year, showing a steady increase despite some recent ups and downs. Monthly, house prices grew by 0.5%, which was unexpected since experts had predicted a smaller rise of 0.1%. This monthly increase was the largest since December last year. However, the annual gain was one of the smallest since October, just after April’s 3.4% increase.
Monthly and Annual Price Changes Explained
The seasonally adjusted monthly increase in house prices was significant in May. It reversed much of the fall seen in April, when prices dropped sharply. Experts had expected a slow growth, but the actual 0.5% rise was stronger than predicted. On the other hand, the yearly increase of 3.5% was relatively low compared to previous months, making it the second-smallest increase since October. This shows that while prices are still rising, the pace has slowed compared to earlier in the year.
Impact of Government Tax Changes and Market Demand
Earlier in the year, house sales surged in March as buyers rushed to complete purchases before a partial exemption on purchase taxes ended. This caused a sharp fall in sales in April once the tax relief finished. But according to Nationwide, demand picked up again in May, showing that buyers remain interested in the property market despite some challenges.
Economic Factors Supporting UK Property Market
Nationwide’s chief economist, Robert Gardner, explained that the UK housing market is still supported by strong economic factors. Even though there is uncertainty in the global economy, low unemployment and wages rising faster than inflation are helping buyers. Additionally, the possibility of further interest rate cuts by the Bank of England makes borrowing cheaper, encouraging more people to buy homes.
In summary, the UK housing market showed resilience in May with a strong monthly increase in house prices and steady annual growth. While the pace of yearly price rises has slowed, underlying economic conditions like low unemployment and rising wages continue to support demand. Tax changes earlier this year caused temporary shifts in buying patterns, but overall, the market is holding up well. This suggests that despite global uncertainties, the UK housing sector remains a key part of the economy and attractive to buyers.