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Increase in UK property prices described as a false hope

The figure, the largest monthly increase in asking prices since May last year, may be misleading because overall 20% has been wiped off property prices since the house price crash began, according to Rightmove which publishes the monthly data.

Miles Shipside, commercial director of Rightmove, said it was typical of estate agents to put up house sellers' prices at the start of the year, in an attempt to cash in on the seasonal increase in potential homebuyers.

'Sales are being achieved at around 25% below peak prices, yet new sellers coming to the market are starting out asking an average of only 10% less. This is very short-sighted,' he explained.

He added that the group expected to report further falls in asking prices in the coming months, and is forecasting a 10% drop during the whole of 2009.

Rightmove said the number of properties coming on to the market remained at record lows, with only 75,140 people putting their home up for sale during the four weeks to February 7, a 45% drop compared with the same period last year.

Shipside criticised estate agents for being too bullish. 'A lack of fresh stock leads some agents to suggest a more optimistic initial asking price, influencing a seller to give the most bullish estate agent the instruction to sell,' he said.

The National Association of Estate Agents said it is not bullish about the state of the property market. 'It is too early to say whether this increase in property prices, picked up by several organisations including the NAEA, will continue. The NAEA believes that it reflects that in certain areas the downturn is slowing and hopefully beginning to bottom out, as opposed to heralding the end of the housing slump,' said NAEA chief executive Peter Bolton King.

'What is clear is that if confidence is returning to the market in any form, it is the job of the Government and the major lenders to try responsibly to sustain it. The NAEA believes that a complete suspension of stamp duty from the Government, and increased availability of mortgages from the banks, would achieve this,' he added.