Assetz® News - House prices leap in May

House prices leap in May

15th June 2006 |

A new report from the Royal Institution of Chartered Surveyors (Rics) has found that house price increases gained significant momentum in May.

According to Rics, May saw the strongest house price rise in two years, which suggests once again that the property market has been able to survive a minor scare.

With the stock market wobbling and a number of analysts predicting interest rate hikes, many had suggested that the housing market would stutter in May but the report from Rics indicates that it has continued to strengthen in spite of these pressures.

This has been helped, of course, by the healthy economic environment and improved consumer confidence in the last couple of months. Demand for property has been rising accordingly, with 20 per cent more chartered surveyors reporting a rise than a fall in May, compared with just 15 per cent in April.

For those keeping an eye on a property investment portfolio, the house price increases were far from uniform and certain areas have been performing much better than others.

Once again, the London market saw strong growth in May while Scotland and the north of England have also seen prices climbing at pace.

In Wales and in the midlands, however house price growth has been described as "mild" or "flat".

Despite a number of reports in recent weeks speculating that buyer interest will dwindle as consumers become increasingly concerned about the prospect of interest rates rising, chartered surveyors actually saw the largest rise in the number of enquiries from would-be purchasers since last October. While demand is still outstripping supply in many areas, May also saw the largest rise in the number of sellers coming onto the market since April 2005.

Rics spokesman, Jeremy Leaf, said: "The strength of the housing market suggests consumer confidence in the UK economy. Buyers are trading up the housing ladder and have blown dust from their wallets as interest rates remain stable."

At the same time, Mr Leaf advises that the rise in the number of sellers on the market could mean house price increases in the second half of 2006 are a little more subdued. With Home Information Packs introduced next year and HMO legislation soon impacting upon the buy-to-let sector, he also suggests that more people may be tempted to sell in the months to come.

Meanwhile, the European Central Bank has calculated that euro zone house prices increased by a solid 7.6 per cent in 2005, rising from 7.2 per cent in 2004. As reported by AFX News, house prices in real terms are increasing at their fastest pace for around 20 years.

Overseas property investment remains a popular choice with those looking to add a little interest to a portfolio the likes of Spain and France have remained exceptionally lucrative in the last few years.

The French market enjoyed house price growth of 15.5 per cent and Spain was close behind at 13.9 per cent, while both are also popular options in terms of rental income.