House prices rise 0.3% in May
House prices rose by 0.3% in May against the backdrop of a 'lacklustre' economy, according to Nationwide.
The modest monthly increase, up from a 0.6% increase in April, puts the average property price at £167,208, which is still 1.2% lower than a year ago. On a three-month basis, prices have risen by 0.6%, broadly unchanged from the previous month, according to data from the lender.
Robert Gardner, chief economist at the building society, believes the "modest" growth continues to mirror the "lacklustre trends evident in the wider economy".
"The UK economy returned to growth in the first three months of 2011, albeit at a modest pace. Nevertheless, the modest improvement in economic conditions has so far been insufficient to pull the housing market out of its torpor," he says.
Gardner points to continuing "headwinds" facing households as reason for the modest growth in the property market.
He expands: "Despite recent increases in employment, household budgets remain under pressure, with debt levels still high and inflation rising almost twice as fast as wages."
Going forward, Gardner says the outlook remains "uncertain" and house prices will move "sideways": "Economic conditions are expected to continue to improve as the year progresses, but the recovery is likely to remain weak compared with previous upturns."
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.