The average cost of a UK home increased slightly in May, despite forecasts of a marginal reduction, according to the latest Halifax House Price Index.
The monthly report from the UK’s largest mortgage lender showed that house prices rose by 0.6 per cent in May, which was double the rate forecast in a Reuters poll of economists and a reversal of the 0.8 per cent monthly drop recorded in April.
A quarterly rise was also observed, with a 1.4 per cent increase between March and April, compared to the December to February period, indicating continuing market activity in the warmer months.
Across the year, the average UK house price remains 9.2 per cent higher than 12 months ago, which is consistent with April’s figures, which were also 9.2 per cent higher than a year before.
Across the UK, home buyers are now paying an average of £213,472 for a UK home, compared to £196,429 in May 2015.
The Halifax report did note a dip in home sales in April, with the number of properties being sold falling from 153,700 in March - which was the highest monthly total since records began - to 84,300 in April, was attributed to the introduction of new higher stamp duty tax rates for buy to let and second homes in April.
Using figures from the Bank of England, the report also indicated that stamp duty changes have affected mortgage approvals, with the volume of approvals for house purchases falling by 5.8 per cent between March and April.
Martin Ellis, Halifax housing economist, said low interest rates, increasing employment and rising real earnings continue to support housing demand.
“The strength of demand is causing house prices to rise at a brisk pace in quarterly and annual term,” he explained.
Mr Ellis added that a sustained period of higher-than-earnings house price growth should result in some slowdown in growth as the year progresses.
Analysts at Deutsche Bank, S&P and Fitch claim that voting to leave the European Union would reduce the value of UK houses, and figures from the International Monetary Fund also point to the possibility of house price declines.
Figures from the Treasury also suggest that average house prices could be up to 18 per cent lower by 2018 in the event of a UK vote to leave the EU, but this needs to be weighed against the fact that house prices would rise by around 18 per cent over the same period.
Buyer demand is also as great as it has ever been in the UK, which analysts say would help to stimulate the market and ensure that activity is sustained in the years ahead, regardless of the referendum outcome.