UK house prices continued to log double-digit annual growth in May underpinned by the improvement in the labor market, data from the Nationwide Building Society showed on Wednesday.

House prices grew 11.2 percent on a yearly basis in May, following the 12.1 percent increase in April. Nonetheless, the annual growth was faster than the economists' forecast of 10.5 percent. On a monthly basis, house price inflation more than doubled to 0.9 percent from 0.4 percent. Prices increased for the tenth consecutive month. Economists had expected a monthly rate of 0.6 percent.

Despite growing headwinds from the squeeze on household budgets due to high inflation and a steady increase in borrowing costs, the housing market has retained a surprising amount of momentum, Robert Gardner, Nationwide's chief economist, said. "We continue to expect the housing market to slow as the year progresses," said Gardner. Household finances are likely to remain under pressure with inflation set to reach double digits in the coming quarters if global energy prices remain high.

"Although the monthly figure gives no evidence of a slowdown in price increases, the decline in the annual rate supports our view that the peak is probably behind us," Andrew Burrell, an economist at Capital Economics, said.

The economist expects moderate fall in house prices in 2023 and 2024. Nonetheless, even this cumulative 5 percent correction is not enough to reverse more than a fraction of their pandemic surge.

Official data released on Tuesday showed that mortgage approvals declined to the lowest since mid-2020 in April. Approvals decreased to 66,000 and remained below the twelve-month pre-pandemic average.

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