The data from Hometrack also showed that demand for housing continues to grow faster than supply, up by 6.6% in March with supply increasing by just 1.9%. It also shows that the gap between supply and demand remains extended and shows no sign of changing in the short term.
Mortgage rates at 3%, compared to over 5% before the downturn, have created additional buying power and are now being priced into the market on improved buyer confidence, it adds.
Overall the survey shows all regions registered higher prices in March and the year on year rate of growth is positive across all regions for the first time since September 2007.
However, in four regions the rate of house price growth remains below 2% with prices rising slowly off a low base in the North, the North West, Yorkshire and Humberside and the East Midlands.
‘While market conditions are improving it is important to note that there are large parts of the housing market with limited impetus for price rises as falling incomes, slower employment growth and limited access to credit constrain demand,’ said Richard Donnell, director of research at Hometrack.
‘The markets that are starting to recover in the regions outside the south tend to be those in the higher value areas where buyers have more embedded equity in their homes,’ he added.
The survey also shows that time on the market has fallen below eight weeks to 7.9 weeks for the first time since October 2007 and the proportion of the asking price achieved is at its highest level for 10 years at 96.2% while in London the proportion of asking price being achieved is over 99% as strong demand from a broad base of buyers chase scarce supply of homes for sale.
‘Much has been made of the impact of Help to Buy but the overall volumes of sales supported by the scheme remain relatively small. The real driver of higher house prices is record low mortgage rates and strong demand from first time buyers and investors who have no property to sell which is compounding scarcity,’ said Donnell.
‘With average mortgage rates currently at 3% or lower, compared to over 5% before the downturn, households have seen a significant boost to buying power who are now being priced into the market on improved buyer confidence,’ he added.
The report estimates that the scale of price rises over the next 12 to 18 months will be dictated by the ability and willingness of owner occupier households and investors to further bid up the price of housing.
‘Looking ahead the imbalance between supply and demand is set to remain a feature of the market and prices are set to continue to rise. The scale of price rises over the next 12 to 18 months will be dictated by the ability and willingness of owner occupier households and investors to further bid up the price of housing,’ said Donnell.
He also pointed out that the introduction of enhanced Mortgage Market Review tests for mortgage applicants are being rolled out by mortgage lenders before the end of April and they are expected to impact on demand from first time buyers. Yet cash buyers and investors, who account for up to two fifth of sales, are not affected by these changes.
‘Deteriorating affordability in high price and high growth markets should start to act as a brake on price rises but determining the timing of this is complex especially if the expectations for house price growth amongst buyers is high,’ he explained.
‘The London and the South East markets continue to post above average price increases but it is notable that the coverage of areas experiencing price rises has fallen slightly in March. While mortgage based buyers are being subject to greater affordability tests, the appreciation of sterling in recent months is making London property look less affordable for overseas buyers,’ he said.
‘The greatest impact on demand will come from an increase in interest rates or growing expectations of an interest rate rise. While any increases are likely to be small this is likely to be the most likely factor that checks the currently growth in demand for housing,’ he concluded.
