Two out of every five homes bought with cash
Date online: 05/06/2015
The housing market paused for breath in May after enjoying a strong spring bounce, figures showed today.
The average cost of a home edged ahead by just 0.3 per cent during the month, after soaring by 1 per cent in April, according to Nationwide Building Society.
The annual rate at which prices are increasing also slowed to 4.6 per cent, its lowest level since August 2013 and down from 5.2 per cent for the previous month.
Robert Gardner, Nationwide’s chief economist, said: “This resumes the gradual downward trend that had been in evidence since the summer of 2014, which was briefly interrupted in April when price growth edged up to 5.2 per cent from 5.1 per cent in March.
“Annual house price growth is now running at less than half the pace prevailing in mid-2014.
“Over the longer term we would expect house price growth to converge with earnings growth, which has typically been around 4 per cent per annum.”
But he added that a lot depended on the supply of properties for sale, particularly as the number of new homes being built in recent years had failed to keep pace with population growth.
Despite the slowdown in the rate at which house prices are rising, May’s 0.3 per cent increase still pushed the average cost of a UK home up to a new record high of £195,166.
The Nationwide index is the first one to be published covering May.
"There has been a significant jump in the proportion of cash buyers in the wake of the financial crisis"
It comes after a raft of data for April showed a pick up in both price growth and activity in the property market, causing economists to predict annual house price growth may have reached its trough.
Meanwhile, Nationwide said the proportion of properties bought with cash reached a record high of around 38 per cent during the first quarter of the year.
It added that demand from cash buyers had helped to support transaction levels in the property market during a period in which mortgage lending had remained relatively subdued.
Gardner said: “The low interest rate environment is likely to have supported the flow of cash into other asset classes in recent years, including UK residential property.”
He added that there had been a significant jump in the proportion of cash buyers in the wake of the financial crisis, as tightening credit conditions and a deteriorating labour market had limited the number of people able to buy with a mortgage, though not affecting cash buyers.