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House prices rise again in May

The UK housing market gained further momentum in May as average prices rose again month-on-month, according to Nationwide building society, who reported a 0.4pc rise.

This comes just ten days after Rightmove reported that the average price of a London property had surpassed the £500,000 mark. Although the average price across the whole of the UK is far lower at £167,912, this has been steadily increasing and is 1.1pc higher than prices 12 months ago.

This is the highest year-on-year house price increase recorded since November 2011, while property sales were also said to be up around 5pc on a monthly basis compared to the same periods in 2012.

According to Nationwide’s chief economist, Robert Gardner, there are a number of contributing factors that are helping the property market to gain strength.

“There has been an improvement in the availability and a reduction in the cost of credit, partly as a result of policy measures, such as the Funding for Lending scheme.

“With the UK returning to growth in the first quarter of 2013, the improvement in wider economic conditions may also be playing a role in boosting sentiment”, he said.

Funding for Lending allows banks to offer cheaper loans to consumers. The Government issues the banks with cheaper credit as long as they commit to passing this onto consumers, who will in turn use the money to strengthen economic growth by purchasing property or investing in business.

However, despite the fact that the property market has continued to gain momentum from the start of 2013, there are warnings that we are not yet out of the woods. Inflation is still high and putting pressure on UK households, while employment and wage increases for employees are slow, meaning disposable incomes are still low.

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