This measure of the underlying trend shows that prices are in modest decline as has consistently been the case over the past 12 months. The average UK house price in May of £160,519 was 1.4% lower than in December 2010 on a seasonally adjusted basis.
On an annual basis, prices in May were 4.2% lower as measured by the average for the three months to May against the same period a year earlier. Modest improvement in the balance between supply and demand.
The ratio of house sales to the stock of unsold properties on surveyors' books edged up for the third successive month in April, according to the latest RICS monthly survey. This ratio is a measure of market conditions that has historically proved to be a good predictor of short-term house price movements.
Evidence of a slight tightening in market conditions suggests that there may be an improvement in the house price trend over the coming months.
House sales remain subdued. The number of properties sold in the first four months of 2011 was 5% lower than in the same period last year - 279,000 against 293,000 - according to the latest figures from the HMRC.
But tentative signs of an improvement in activity. The number of mortgages approved to finance house purchase is a leading indicator of completed house sales. Industry-wide approvals in the three months from February to April were 2% higher than in the preceding three months on a seasonally adjusted basis, according to the latest Bank of England figures.
A slowly improving economy and continuing low interest rates should support housing demand. GDP increased by 0.5% between the final quarter of 2010 and the first quarter of 2011, offsetting a similar sized decline in the previous quarter, according to the ONS.
Commenting, Martin Ellis, housing economist, said:
"House prices continue to drift modestly downwards as measured by the underlying trend. Prices in the three months to May were 1.2% lower than in the previous three months; unchanged from April. There was a 0.1% rise in prices in May following April's 1.4% decline.
"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.
"Overall, we expect a moderate improvement in the economy during the remainder of 2011, which combined with continuing low interest rates, is likely to support housing demand. This should prevent a further marked fall in prices and help to stabilise property values later in the year."
