The report from Hometrack, based on data from estate agents, shows the third consecutive month of house price growth and the highest monthly rise since June 2004. The average house prices now stand at £161,700.
Estate agents report that the number of buyers registering rose by 26 per cent over February and demand has run well ahead of supply.
It is a general shortage of homes for sale that really underpins the growth in average values over the last month, Richard Donnell, director of research at Hometrack says.
The strong end to 2005 saw agents sell a significant amount of stock. They have started the year short of stock. As the supply of homes for sale is not keeping pace with demand so we are seeing the strong rise in average prices. This trend is most obvious in the southern parts of the country where the greatest imbalance exists, continues Donnell.
The Hometrack analysis shows that in London prices rose by 0.9 per cent on the back of a 35 per cent rise in new buyers, but only a 10 per cent rise in the number of homes for sale.
A similar mis-match between supply and demand resulted in prices move higher by 0.3 per cent in the South East and 0.5 per cent in East Anglia. In all these regions where prices are rising, the average time taken to sell property has been declining – in London the average is under five weeks for the first time since July 2004.
In contrast house price growth away from the south of the country remains subdued. The difference between supply and demand is less stark and the pricing of housing in many areas is still adjusting after the phase of very strong growth over the period 2000 to 2004. The time taken to sell property remains above average and achieved prices are still below the average for the last few years.
The counties reporting the highest price rises are Central London & City (1.6 per cent), North London (1.5 per cent), East London (1.2 per cent) and Cambridge (0.9 per cent). South east London, south west London and west London all reported price rises of 0.7 per cent. The worst performing counties are mainly found in the North, including South Yorkshire (-0.1 per cent), North Lincolnshire (-0.1 per cent) and East Riding of Yorkshire (-0.1 per cent).
Donnell comments: Prices are likely to continue to rise over the next month or so as a result of buyers returning to the market and supply remaining limited. Most of this growth is likely to be concentrated in southern parts of the country.
The key issue is whether the momentum of the first few months of 2006 can be maintained, especially after the strong end to 2005. Much hinges on the outlook for interest rates, the strength of the economy and the direction of consumer confidence. We expect values to keep rising, but the scale of growth over the later parts of the year is set to be far more modest than what we are currently seeing in a supply constrained market.
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