House prices in Britain rose by 0.5 per cent in May, half the rate of the previous two months but enough to lift property values within 10 per cent of their 2007 peak, a survey showed today.
The Nationwide building society said the increase meant prices had risen 12.2 per cent since February 2009 and were just 9.5 per cent below the high scaled in October 2007.
The annual rate of increase fell however to 9.8 per cent from 10.5 per cent, reflecting the weaker pace of increase in May this year compared to last.
House prices have risen in 12 of the past 13 months on the Nationwide index, although the pace of
growth appears to be slowing. May's increase followed an upwardly revised 1.1 per cent jump in April and a 1.0 per cent rise in March.
The rebound in property prices over the past year has been fuelled by record low interest rates and
limited supply. While the former is likely to remain a supportive factor, anecdotal evidence suggests more properties are starting to come on to the market.
Nationwide's chief economist Martin Gahbauer said current supply and demand dynamics were consistent with "relatively stable to modestly upward trending prices".
He said the future outlook for the market could depend on the government's plans to increase capital gains tax.
"If there is a significant time lag between the announcement of the increase and its actual implementation, then second home owners and buy-to-let landlords may decide to sell in advance," Mr Gahbauer warned.
Britain's coalition government had pledged to raise capital gains tax closer to income tax, although
precise details will not be known until the annual budget on June 22nd.
Reuters