House prices bounce back in June
House prices rallied 1.2% in June, according to Halifax, with the average property soaring £2,000 in value.
The average house price is now £163,049, up £2,000 from May's figure. Despite showing the biggest monthly increase since October 2010, the lender records a drop of 3.5% year-on-year.
Martin Ellis, housing economist at Halifax, points to low interest rates, an increase in employment and tightening in market conditions as the primary drivers behind the rise.
"A slowly improving economy and sustained low interest rates should help to support broad stability in the market over the coming months. The market is, however, likely to continue to face significant headwinds which are expected to constrain housing demand," he says.
Activity within the housing market remains stable. Mortgage approval figures from the Bank of England show that loans approved for house purchase ticked up 1% in May from a four-month low in April.
Paul Diggle, property economist at Capital Economics, comments that "on balance, June's rise is likely to provide only temporary relief". He says: "The bounce in house prices in June is unlikely to signal that the downwards pressure on house prices has abated. With the squeeze on real pay likely to intensify until well into next year, house prices still have further to fall."
Diggle highlights concerns over the "poor outlook" for household finances and unemployment. "Historically, house prices have not fared well at times when consumer spending has been falling," he says.
This article was written for Money Observer