House prices appear to be recovering with growth been recorded  once again last month, however the rate of growth slowed on that of previous months indicating that the nature of the recovery is still not stable.

Property values increased by 0.5 per cent over May, down from the 1.1 per cent increase in April and the 1 per cent over March according to figures released. This means that the annual rate of growth has fallen to 9.8 per cent from the 10.5 per cent figure in April which was the first double figure yearly rise in property prices since back in summer 2007.

Although the percentage increase in prices was down last month, the rise has brought house prices to within 10 per cent of the peak of October 2007. The decrease in the rise of property prices followed a report from than the Bank of England that was anything but positive about the rate of growth in mortgage approvals for house buying.  The report has created a significant amount of worry regarding the recovery and the outlook for the property market as a whole.

Howard Archer who is the chief UK economist at IHS Global Insight stated:

"The economic fundamentals are still far from robust for the housing market,

"There are also growing concerns that the Bank of England will have to raise interest rates before the end of the year due to higher-than-expected inflation. We believe that house prices are likely to be erratic over the coming months."

It is widely believed that the sustained increase in house prices over the last few months is solely down to the lack of new homes coming onto the market. However, a potential increase in supply caused by proposed taxes on second homes could jeopardise the recovery of the housing market.

Author:  Thomas Davies

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