The six major UK house price indices show an average of 6.8% annualised growth for the twelve months prior to May 2006. This is a 0.9% increase on the annual growth up to April (5.9%) and a 2.4% increase since the beginning of the year (4.4%).

The market is continuing to show positive growth, but as we enter the summer, property investment group Assetz anticipates that annual growth will level off at around the 5% mark, in line with its original predictions of 5 – 7% growth for the year.

Buy-to-let mortgages are currently on the limit of affordability for investors, while homebuyers are similarly stretched. Consequently Assetz expects supply and demand to equalise at a level of house price growth similar to wage growth, in the near term.

The affordability issue is also keeping the housing market closely tuned with interest rate movements, therefore it is good news that the MPC maintained rates at 4.5% this month.

While investors would probably take it in their stride, even a quarter-point rise would cause a substantial change in homebuyer attitudes and put another nail in the coffin of the first time buyer. Assetz does not expect to see any change now until 2007, when a 0.25% rise is probable.

Stuart Law, Managing Director of Assetz comments: "Investors are continuing to drive the market, having held their nerve throughout 2005. They acted quickly to snap up opportunities as homeowners took a step back, soaking up most of the opportunities from price falls, and now they are reaping the rewards of their long-term confidence in the market."

Investors who paid a 15% deposit on a £150,000 property will have seen a 44% return on the cash they invested over the last twelve months, incorporating 39% return from 6.8% annual growth along with a 4.9% net rental profit after management costs.