House prices rise strongly

Rise will come as a surprise to some

UK house prices increased strongly last month despite a sharp drop-off in the number of first-time buyers, according to the Halifax.

The bank's latest property survey found that prices rose by 1.5% in May, up from a rise of 0.5% during the previous month.

But the annual rate of increase slipped to 22.7% last month, down from 23.6 % in April.

The findings echo the results of last week's survey by the Nationwide, which also found prices rebounding in May after little change in April.

First-time buyers

Halifax, Britain's biggest mortgage lender, said the return to higher price growth came despite the significant fall in the number of first-time buyers, which has moderated the overall pace of the market.

Overall, the figures showed the first five months of 2003 saw house prices increase at an average monthly rate of 1.3%.

Halifax chief economist Martin Ellis said: "The increases so far this year are, however, at almost half the pace of the last five months of 2002 when prices rose by 2.4% a month on average, one of the periods of highest house price inflation ever recorded."

Last week, the Nationwide building society reported its own index of house prices had risen by 1.3% but for the rest of the year they predicted a slowdown.

However, the strong rise in prices recorded by the Halifax and Nationwide will come as a surprise to many market watchers.

Price blip

Recent surveys from the Royal Institution of Chartered Surveyors (RICS) and property website Hometrack had indicated that prices in England and Wales were stagnant overall and falling in London and the South East.

According to Capital Economics the rise in prices recorded by the Halifax in May was a "temporary blip", a market bounce following the conclusion of the war in Iraq.

"First-time buyers are being particularly hit by the increasingly large deposits and multiples of their income that they are having to borrow in order to get onto the housing ladder," a Capital Economics statement said.

As a result, the group predict that house prices will fall in 2004.