LONDON (Reuters) - House prices rose slightly more than expected this month to leave prices broadly unchanged on a year ago against a backdrop of generally subdued demand, mortgage lender Nationwide said on Thursday.
House prices rose 0.3 percent in May after a 0.3 percent drop the month before - a marginally bigger rise than economists had predicted - leaving the overall level of property prices 0.7 percent lower than a year earlier.
“Over the last eighteen months, house prices have been fairly stable, despite the challenging economic backdrop. May’s data provides some comfort that this pattern is being maintained,” said Nationwide’s chief economist Robert Gardner.
Nationwide said that house prices, particularly in southeast England, were being kept up by a lack of construction.
“Demand for homes remains subdued on the back of weak labour market conditions, but the lack of homes coming onto the market is providing support for prices. This is in part a reflection of the low rate of building in recent years which has failed to keep pace with household formation,” Gardner said.
Bank of England data on Wednesday showed a modest pick-up in housing market activity, with mortgage approvals - a leading indicator for housing market activity - running at a three-month high in April.
However broader lending measures were subdued, and official data last week showed that the economy remained in recession.
Editing by Ron Askew