House prices rose again in February, according to Hometrack?s latest data. According to the research database, prices rose by 0.4% last month – the highest monthly rise since June 2004. Hometrack, considered to be one of the most pessimistic indexes, attributes market growth to increasing numbers of new buyers and a lack of houses on the market. After three consecutive months of growth, house prices now stand at £161,700.
Nationally, the number of buyers registering with agents rose by 26% over February, according to Hometrack?s figures. ?A key driver of higher house price inflation over February has been a surge in the number of new buyers coming into the market,? affirms Richard Donnell, Hometrack Director of Research. But Mr. Donnell also believes that a strong end to 2005 left agents short of stock in the New Year. ?It is a general shortage of homes for sale that really underpins the growth in average values over the last month,? he claims.
The inequality between supply and demand is most obvious in the southern parts of the country. Hometrack?s figures show that in London prices rose by 0.9% on the back of a 35% rise in new buyers but only a 10% rise in the number of homes for sale. A similar inconsistency between supply and demand resulted in prices increasing by 0.3% in the South East and 0.5% in East Anglia. Meanwhile, in these regions, the average time taken to sell property has been reducing. An average London property now spends under five weeks on the market, for the first time since July 2004.
In contrast, Hometrack notes that 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 is still settling after the phase of very strong growth between 2000 and 2004. Properties are taking longer to sell and achieved prices are still below the average for the last few years.
According to Hometrack, Central London and City saw the highest price rises (1.6%). Other areas of substantial growth were North London (1.5%), East London (1.2%) and Cambridge (0.9%). South-East London, South-West London and West London all saw price rises of 0.7%. Northern counties such as South Yorkshire, North Lincolnshire and East Riding of Yorkshire were among the worst performing counties.
Mr. Donnell is positive for the month ahead, ?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,? he says, adding that most of this growth is likely to be concentrated in southern parts of the country.
Nevertheless Hometrack is reluctant to forecast substantial rises for the rest of 2006. ?Much hinges on the outlook for interest rates, the strength of the economy and the direction of consumer confidence,? Mr. Donnell explains, adding that a period of improved market activity was always inevitable after the lengthy slowdown between mid 2004 and mid 2005. ?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,? he maintains.
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