A new index has revealed that annual house price growth was 4.7% in May this year, compared to 4.9% the month before.
The average house price rose from £202,436 in April to £204,368 in May, equating to a 0.2% rise on a seasonally adjusted basis, according to the latest Nationwide House Price Index.
However, Nationwide’s chief economist Robert Gardener is reported as saying that it is difficult to assess the strength of the housing market due to the volatility created by the introduction of the 3% stamp duty surcharge on buy to let and second homes, that came into effect on 1 April.
Gardner believes that house purchase activity is likely to fall in the months ahead given the number of purchasers that brought forward transactions.
“The recovery thereafter may also be fairly gradual, especially in the buy-to-let sector, where other policy changes, such as the reduction in tax relief for landlords from 2017, are likely to exert an ongoing drag.
“Nevertheless, healthy labour market conditions and low borrowing costs are expected to underpin a steady increase in housing market activity once stamp duty related volatility has passed, providing the economic recovery remains on track.
“However, it is possible that the recent pattern of strong employment growth, rising real earnings, low borrowing costs and constrained supply will tilt the demand/supply balance in favour of sellers and exert upward pressure on price growth once again in the quarters ahead”.
The index has been described as “surprisingly upbeat” by Mark Posniak, managing director at Dragonfly Property Finance, who said that the broader prognosis given by the Nationwide, specifically that the market could favour sellers, is out of sync with the doom-mongering of various property market commentators.
“The volatility caused by the recent stamp duty changes on buy-to-let and second homes, coupled with the EU referendum this month, has certainly made 2016 a difficult year to predict.
“The perennial issue of weak supply has the potential to act as a glass floor under house prices.
“Affordability is a massive issue in many areas of the country, particularly the capital, but it is being counterbalanced to an extent by continued low borrowing costs.”
Jeremy Leaf, former RICS chairman and north London estate agent, added:
"The latest figures from Nationwide are quite encouraging in a way because the slowdown in price growth is not as bad a comedown as one might expect following the rush from landlords and second homebuyers to beat the stamp duty hike.
"The figures are also indicative of a relatively strong underlying market. Other buyers were, and still are, just as active as some of the investors in the period leading up to the change in stamp duty rates. This is reflecting what is happening on the ground where some vendors are reducing prices in order to get properties sold because there is less demand."