UK house prices property 2017
House prices and rents are set to rise further in 2017, underpinned by a supply shortage Reuters

House prices in the UK slipped 0.2% in the three months to May, fuelling speculations Britain's housing market is slowing down.

According to the latest Halifax House Price Index, house prices in the quarter between March and May were 0.2% lower than in the previous three months, following on from the first quarterly decline since November 2012 recorded between February and April.

Prices rose 0.4% month-on-month in May defying expectations for a 0.2% decrease, and were 3.3% higher than in the corresponding period in 2016, slightly higher than the expected 3%. The rate of growth, however, was lower than the 3.8% recorded in the previous month and was the lowest annual rate since May 2013, when house prices rose 2.6% year-on-year.

The annual rate of growth, meanwhile, is less than half the 10% peak reached in March 2016 and growth is expected to remain subdued due to an ongoing supply shortage.

"The fact that the supply of new homes and existing properties available for sale remains low, combined with historically low mortgage rates and a high employment rate, is likely to support house price levels over the coming months," said Halifax housing economist Martin Ellis.

However, Halifax added house prices remain approximately 11% above their previous peak recorded in 2007.

"Prices are being underpinned by a sharp reduction in supply," said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

"The extremely low rate of job losses means that few homeowners are being forced to sell their homes and many are deciding to delay listing their homes until the market strengthens again.

"So, while the days of rapid house price growth fuelled by sharp increases in leverage are over, we still see scope for prices to edge up over the rest of 2017."

Last week, Nationwide said house prices fell a seasonally-adjusted 0.2% from a month earlier following a 0.4% decline in April, marking the first time house prices have fallen for three consecutive months since 2009.