This, the second monthly house price increase in three months reported by the building society, means house price averages now sit at £154,016. Year-on-year statistics from Nationwide reveal house prices are 11.3 per cent lower than they were in May 2008.
In March, Nationwide reported prices had risen by 0.9 per cent, but then fell by 0.4 per cent in April.
Nationwide chief economist Martin Gahbauer says: “Although the short-term trend in house prices has clearly improved from where it was at the beginning of the year, it is still too early to say that the market is turning definitively.
“During the downturn of the early 1990s, there were many months during which prices rose, only to fall back down again in subsequent periods. In the current downturn, the combination of rapidly rising unemployment and tight access to credit implies that the last of the price declines has probably not been seen yet. Nonetheless, the improvement in house price trends is consistent with signs of stabilisation in several other economic indicators and suggests that any further price declines may occur at a less rapid pace than in 2008.”
Gahbauer says one possible reason for the increase in price is the lack of housing stock in the UK. He says: “It is not yet certain whether the sales-to-stock ratio will rise on a more sustained basis over the coming months. House sales still remain close to record lows, so that the improvement in the supply-demand balance is so far mostly attributable to a decline in the stock of property on estate agents’ books.
“The rate at which additional property is coming onto the market could be lower than the rate of sales, or if few new homes are being built. Alternatively, unsold stock levels could fall if existing sellers give up and withdraw their properties from the sales market, either by letting them out or choosing not to move for the time being.
“Recent anecdotal evidence suggests that there has been a large rise in sellers choosing to let their properties instead of holding out for a buyer, which could explain at least part of the fall in stock levels.”