Property values in the UK are up 8.6% when compared with May 2014 despite house prices slipping 0.1% between April and May, according to the latest data from the Halifax.
The average value of a UK home stood at £196,067 last month but the mortgage lender says high demand for homes amid a shrinking market is likely to fuel a surge in property prices this year.
Martin Ellis, housing economist at Halifax, says: “Housing supply remains extremely tight, with the stock of properties available for sale currently at its lowest level for many years.
“At the same time, ongoing economic recovery, increasing employment, real earnings growth and very low mortgage rates are all supporting housing demand.
“This combination has kept annual house price inflation well above earnings growth, although activity levels are subdued.
“The imbalance between supply and demand is likely to continue to push up house prices over the coming months.
“Looking further ahead, the increasing level of house prices in relation to earnings is expected to dampen house price growth.”
Year-on-year house price growth in 2015 has remained within a range of eight and nine per cent, according to the Halifax, compared with annual growth of more than 10% seen in summer 2014.