Average asking prices increased by 2.4 per cent to £254,600 in May compared to a year earlier, the latest cities index from Zoopla reveals. 

The website expects annual growth to hold steady at between 2 and 3 per cent over the next three months although it predicts more downward pressure on prices towards the end of this year.

It says that six weeks on from the English market reopening, sales agreed are 4 per cent higher than pre-Covid levels – despite prolonged market closures in Scotland, Wales and  Northern Ireland.

The rebound in activity is expected to subside in coming weeks as demand has already reduced by 11 per cent, but the reopening of Welsh and Scottish markets will help maintain momentum.

High demand has been putting upward pressure on prices, but this is not expected to last as the lack of 90 per cent LTV and employment woes reduces first-time buyers ability to get onto the housing ladder.

In the year to May, Zoopla’s index of 20 UK cities found that house price growth was strongest in Nottingham at 4.3 per cent, followed by Manchester at 3.9 per cent.

Prices fell by 2 per cent in Aberdeen and by 0.6 per cent in Oxford.

In London prices rose by 1.7 per cent to £478,100. 

Zoopla director of research and insight Richard Donnell says: “The rebound in housing market activity has taken many in the industry by surprise. 

“It is welcome news given the projections for falling economic growth and rising unemployment. 

“Estate agents and developers are responding and using the upsurge in demand to rebuild their sales pipelines and open up their developments.

“We see returning pent up demand and new buyers entering the market creating upward pressure on prices in the face of a lower supply of homes for sale which has been exacerbated by the lockdown.  

“House price growth is set to hold up in the near term and we expect the downward pressure on prices to come in the final months of the year as demand weakens. 

Donnell adds: “While the average asking price for homes marked as sold on Zoopla are 7 per cent higher than a year ago this is down to an increase in sales in higher value markets where activity has remained subdued in recent years. 

“We do not expect the rate of growth in the Zoopla House Price Index to reach this level, rather it is expected to hold steady at 2 per cent.

“The Welsh housing market opened this week and levels of demand have already returned close to the levels seen in England in anticipation of the market reopening. 

“Scotland, where the market reopens on 29 June has also seen demand rise back to pre-Covid levels but sales remain more than two thirds lower and are expected to rebound in the coming weeks.”