Housing market 'showing stability'

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Communities and Local Government said the average cost of a home in the UK jumped by 1.1% during the month, while the annual rate at which prices are declining eased to 13%, down from 13.6% in March.

The Royal Institution of Chartered Surveyors also reported upbeat figures on the market, with inquiries from new buyers increasing for the seventh month in a row during May to reach their highest level since August 1999.

The number of properties sold by estate agents also continued to rise, to reach an average of 11.8 during the three months to the end of May, up from 10.6 in three months to the end of April.

RICS said a shortage of new homes coming on to the market, combined with the increase in demand, was providing some support for house prices, with the balance of surveyors reporting price falls rather than rises dropping from 58.7% to 44.1% in May.

Surveyors also feel increasingly optimistic about the prospects for the market in the coming months, with only 11% more chartered surveyors expecting to see further price falls, the lowest level since July 2007 when the housing market correction first began.

At the same time, 40% more surveyors expect sales levels to rise in the coming months, the highest level since the question was first asked in 1998.

The latest figures build on a run of positive data on the housing market, with both Nationwide and Halifax reporting price rises during May of 1.2% and 2.6% respectively.

But despite rising sales and increasing numbers of mortgages being approved for house purchase, economists are still cautioning that it is too early to call the bottom of the market due to rising unemployment and the ongoing problems in the mortgage sector.

Howard Archer, chief UK and European economist at IHS Global Insight, said: "Despite the recent flurry of improved housing market data and surveys, we remain sceptical that house prices have bottomed out. Significantly, it is not uncommon for there to be months of rising prices when house prices are still trending down."