House prices Drop 3 Months to May but May is GOOD!

According to Halifax, property values dropped 4.2% in the three months to May compared to the same three months last year.  This showed the Halifax's house price index's fastest decline for 19 months.

Due to a stronger May, the average house price actually edged higher by 0.1% during May itself, following a 1.4% drop in April.

Chief UK and European Economiast at IHS Global Insight Howard Archer, said: 'The fact that Halifax reported that house prices could only rise fractionally in May after a particularly sharp drop in April reinforces our view that further weakness lies ahead in the face of ongoing muted housing activity and difficult economic fundamentals.

'We maintain the view that house prices are likely to end up declining by some 10% overall by mid-2012 from their 2010 highs.

'This implies that they will fall by around 5% to 8% from current levels depending on which measure you take.'

Nationwide said that house prices edged ahead by 0.3% during May, but it recorded a more modest annual decline of 1.2%.

Martin Ellis, Halifax housing economist, said: 'Low earnings growth, higher taxes and relatively high inflation are all putting pressure on household finances.

'Confidence is also weak as a result of uncertainty about the economic and employment outlook. These factors are probably constraining housing demand and applying some downward pressure on prices.'