House prices continued to push higher in May, industry data showed on Monday, hitting a fresh record as lack of supply weighed heavily.
According to Rightmove, the average asking price of a property coming to market hit a fourth consecutive record in May, rising 2.1% on the previous month to £367,501, the highest for the time of year since May 2014. Year-on-year the price jumped 10.2%.
In April, prices rose 1.6% month-on-month and 9.9% year-on-year.
Average asking prices have now risen by £55,551 in the past two years, Rightmove said, compared to a rise of just £6,218 in the two years leading up to the pandemic.
The property portal said the latest increase had been caused by supply failing to keep up with still buoyant demand. The number of buyers contacting estate agents in May was 31% higher than pre-pandemic levels, though it was down 14% year-on-year.
In contrast, the number of available properties was down 16% year-on-year, and tumbled 55% compared to 2019.
Tim Bannister, director of property science at Rightmove, said: “People may be wondering why the housing market is seemingly running in the opposite direction to the wider economy. What the data is showing us is that those who have the ability to do so are prioritising their home and moving, and the imbalance between supply and demand is supporting rising prices.
“We anticipate that the effects of the increase costs of living and rising interest rates will filter through to the market later in the year, and combination of more supply of homes and people weighting up what they can afford will help to moderate the market.”
Interest rates have risen four times since the end of 2021, to 1%, as the Bank of England tries to tackle surging inflation, which currently stands at 9%, the highest since 1982. The cost of living is being further squeezed by higher energy bills and tax increases.
The BoE estimates inflation will peak at just over 10% by the end of this year, while analysts expect rates to reach 2%.
Victoria Scholar, head of investment at Interactive Investor, said: “After last year’s stamp duty holiday, the furlough scheme – which underpinned strength in the labour market – and other Covid-era fiscal and monetary stimulus, the housing market has gone to strength-to-strength.
“However, there are concerns that the housing market’s peak could be approaching, as near 10% inflation, rising interest rates and an anticipated economic slowdown take their toll.”