House prices rose strongly ahead of Brexit referendum and 'predictions of storm are overblown'

The average UK house price rose by 8.1% over the year to May 2016, the same annual rate of growth as the month before, said the Office for National Statistics (ONS). The new official house-price index, the second to have been published, said the average UK price hit £211,000 in May.

There is a big difference between the regions, however. The average price in London, where there is an acute housing shortage, reached £472,000 after rising by 13.6% over the year.

Prices are higher in the city than anywhere else in the UK. The lowest average price by region is in the north-east of England, where it rose by 3.2% over the year to £124,000 in May.

Before the EU referendum last month (23 June 2016), in which Britain voted to leave, the Treasury released an analysis of Brexit scenarios showing that a severe economic shock could send house prices tumbling by 18%. Since the vote, housebuilder shares have declined, implying that investors are pricing in a fall in house prices as credit tightens and the economy weakens.

"Events since the Brexit vote are showing signs that the house buying market may cool in some areas, allowing house prices to reset," said Ian Thomas, co-founder and director of LendInvest, an online property investment company.

"But predictions of a storm to come in the housing market are overblown. Despite the shock of that result, the fundamentals of the UK housing market haven't changed and won't change in the near future. Irrespective of whether we are in the EU or not, people need homes to live in and we still don't have anywhere near enough of them."

Biggest house-price risers and fallers by local authority in May 2016