House prices rise in May as London leads unexpected rebound

The average house price rose by almost £3,500 between April and May, according to the latest figures from the Office for National Statistics.

In a surprising turnaround for the housing market, the ONS revealed that average house prices rose 1.2 per cent in a month, with London leading the way.

This follows a 0.3 per cent rise between March and April, and means the average house price is up 2.2 per cent year-on-year, with the typical home selling for £285,000.

In cash terms, house prices have risen by more than £6,000 in the last 12 months.

Nicky Stevenson, managing director of property group Fine & Country, said: ‘House prices defied predictions with a stronger than expected performance in May as the economic tide continues to turn.

‘The housing market is gearing up for a summer boost, driven by the economic rebound in May and stable inflation rates.

‘After stagnant figures in April, this recovery marks a promising change in the real estate landscape.’

London leads house price growth in May

Average prices in the capital outperformed the market and rose 3.9 percent between April and May, although earlier falls mean they are only up 0.2 percent year-on-year.

Jonathan Hopper, chief executive of buying agency Garrington Property Finders, said: ‘The shift has been particularly strong in London.

‘Average prices were still falling sharply in the capital up to April, but today’s data confirms they have risen again over the 12 months to May.’

Average house values ​​also rose by 1.9 per cent in Yorkshire and the Humber and 1.5 per cent in the North East of England – these regions have now risen by 3.9 per cent and 3.7 per cent annually.

London is calling: Property prices in the capital have risen by 3.9% since April 2024. An annual price increase of 0.2% brings the average property value to £523,000

Houses go up while floors go down

House prices continue to rise more than flat prices, according to ONS data.

Detached homes in England rose 3.6 per cent year-on-year, selling for an average of £466,000 in May, up £16,000 from £450,000 last year.

The number of townhouses increased by 3.8 percent annually and semi-detached houses by 1.9 percent, it said.

However, flats and maisonettes are down 1.5 per cent year-on-year. The average flat sold for £249,000 in May, compared with £253,000 last year.

London flats fared even worse, with the average flat in the capital down 2.2 per cent, the equivalent of £10,000.

Perhaps this is a hangover from the pandemic, when many people preferred houses to apartments. The work-from-home culture that has continued for some workers since then means the need for more space has not gone away.

Homes on the rise: Prices have grown by around 4% annually as buyers still want space

Buying agent Jonathan Hopper believes many people are put off by horror stories about leasehold property, rather than freehold.

“In many areas, apartments are being left behind by the ever-rising tide of property prices,” Hopper said. “Compared to the rapid growth in house prices, apartment prices are effectively stable.

‘The main reason for this is poor demand. Many buyers, including first-time buyers who have traditionally opted for flats, have been put off by horror stories about leasehold ownership, rather than the freehold ownership that usually comes with a house.

‘Some people have always been uncomfortable with the idea of ​​owning their home just by the plaster, and a series of negative stories about renting has dampened demand for flats and led the new Government to introduce reforms in today’s King’s Speech.

‘I even know conveyancing lawyers who do not accept leasehold purchases because they have become increasingly difficult from a legal point of view.

“All of this is dampening demand for housing and this is being reflected in prices.”

Where are house prices headed now?

The key problem with the ONS house price data is that it is based on sales price data from the Land Registry.

This means that their figures usually refer to sales agreed upon months in advance.

Other house price indices have painted a slightly different picture in recent months.

The price of a typical home fell 0.2 per cent in June, according to Halifax figures based on its own mortgage applications.

According to building society Nationwide’s own data, the average value of a home in the UK is currently around £266,064, having risen by 0.2 per cent or £1,815 between May and June.

And this month, the average sale price of a new home fell by 0.4 per cent, according to Rightmove, the equivalent of £1,617.

However, some predict that prices will recover once the Bank of England starts cutting its base rate, which should drag mortgage rates down with it.

Anthony Codling, head of European housing at investment bank RBC Capital Markets, added: “Higher mortgage rates do not appear to be hampering the housing market or house prices, and with the prospect of a bank rate cut in September – or perhaps even August – we expect house prices to rise rather than fall in the coming months.”