Signs of house price slowdown

House prices rose by just 0.1% in May, the lowest monthly increase since January, Britain's biggest mortgage lender said today.

Halifax said price growth had fallen dramatically, from 1.1% in March and 2% in April, and there were signs the market may be starting to level off.

Despite this, it said year-on-year growth was at its highest level for 14 months.

It has gone up from 8% last month to 9.1% and the average house prices now stands more than £16,000 higher than in May last year at £178,997.

Yesterday, the Council of Mortgage Lenders (CML) revised up its growth prediction for the year from 2% to 7%, saying there were signs the market would remain robust for some months to come.

However, Halifax's chief economist, Martin Ellis, said he expected prices to be held back by rising unemployment and household bills.

"The pressures on the household sector resulting from higher unemployment and significantly higher household bills, together with the current high level of house prices in relation to earnings, are likely to constrain housing demand and curb house price growth and activity over the remainder of 2006," he said.

Howard Archer, chief UK economist at consultancy Global Insight, said recent house price figures from lenders, combined with falls in the number of mortgages applied for and approved, suggested the market was starting to slow down.

"While it is premature to draw any firm conclusions, there are growing signs that the recent 'mini boom' in the housing market is faltering," he said.

"Consequently, we are becoming modestly more confident in our long-held belief that house prices will ease back into an extended period of relatively modest rises over the coming months."

Separate figures also published today by Halifax show how the price rises of the past few years have created a huge number of property millionaires.

The research shows the number of homes valued at more than £1m increased 20-fold over the ten years to 1995, from 3,400 to 66,600.

The number of £1m-plus properties changing hands last year was also much higher than in 1995, although at 3,888 it was down on 2004's figure of 4,331.

London's share of sales was down over the decade. While it capital boasted 79% of the market in 1995, the capital accounted for only 58% of sales last year.

However, Kensington and Chelsea and the City of Westminster remain top locations for pricey property, accounting for one in three £1m-plus sales last year.

While a growing part of the market, £1m sales remain a niche area, accounting for just 0.4% of all sales in 2005.