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Residential property prices in England and Wales rise in may

The monthly data from property website Rightmove indicates that record low interest rates are enticing more into buying but job security and continued tight lending conditions are hampering any recovery.

But the May increase coming on top of a 1.7% rise in April indicates some signs of hope. Rightmove described the current market conditions as being 'a mixture of ambition, optimism and necessity' rather than a return to health for the beleaguered property market because the pricing was probably not realistic enough yet and volumes are still low.

Rightmove said asking prices are 6.2% below their level of May last year and there is little evidence that the rising asking prices recorded in recent months have translated into higher sale prices in the main mortgage lenders' surveys.

In April Halifax reported a 1.7% fall in house prices and a 17.7% annual decline, while Nationwide said prices were 0.4% lower on the month and a fifth down from their peak in October 2007.

The average price of a home newly advertised on Rightmove in May was £227,441 compared to an average selling price of £154,716 recorded by Halifax.

Many homeowners are effectively trapped in their current properties as tighter lending conditions meant the equity in their existing home is no longer enough for a deposit on a more expensive one, Rightmove said.

This might explain why some homeowners would risk scuppering the sale of their property by overpricing it because only an overpriced sale would give them enough money to buy a new home, the property website added.

'Many people who might have wanted to take advantage of the spring selling season to trade up will be victims of equity immobility. The choice of when and how to move is now out of their hands,' said Miles Shipside, commercial director at Rightmove.

'While some of the impetus behind the increase of over £5,000 in average asking prices will be due to ambition or optimism, it will also be out of necessity as new sellers attempt to scrape together enough equity to move,' he added.