It is the fourth consecutive monthly increase and price rises since last month in the South East, South West and Scotland showing the most growth with rises of 1% or more, the index from Home.co.uk shows.
Prices in London increased by 0.8% but the property firm says that given the restricted supply and high demand, as demonstrated by very short marketing times, the capital’s property market is showing the early warning signs of overheating.
A combination of a reduction in the time on market for sales property and the subdued flow of new stock, down 4% on last year, will help support prices going forward and provide a further boost to vendors’ confidence, it says.
London was outperformed by the South East where asking prices were up1.2%, the South West with a rise of 1% and Scotland also with a rise of 1%. The South East has shown four consecutive months of price growth and prices are now 3.9% up on this time last year.
Lack of property supply is a common factor across these high performing areas, and there are also indications that the volume of transactions is gradually improving.
The average asking price of property in London is now £376,021, a rise of 7.5% in 12 months and the firm says this prompts serious questions about how long the market can sustain such a high rate of growth. The current 14% annual reduction in new instructions and the shortest time on market in the UK will only serve to drive prices higher.
If the usual seasonal patterns were being displayed, more vendors would be encouraged to enter the market during spring. However, the total volume of on market property has not shown any considerable growth over recent months and new instructions remain down 4% year on year and 22% down on April 2011. London and the East Midlands have witnessed the largest annual falls in new property stock, with drops of 14% and 8% respectively.
Regional markets are being stimulated by shorter selling times. The typical time on market for unsold property across the UK has fallen 28 days to 102 days since last month. The renewed vigour found in the London and South East markets is, to some extent, moving to other regions of England, Scotland and Wales.
Considerable regional differences do still exist, but, year on year, the typical time on market has dropped in all regions except the North East. Yorkshire and Humber, for example, shows a dramatic improvement, with a typical marketing time currently 30 days less than in May last year. Such significant drops indicate that formerly lacklustre regional markets are finally showing signs of genuine recovery.
‘Nearly six years on from the onset of the financial crisis, it is encouraging to finally see stronger UK performance indicators that are not almost exclusively driven by London. Other areas of the UK are now really beginning to show signs of recovery and that, in turn, will help boost the confidence of local vendors and buyers alike,’ said Doug Shephard, director at Home.co.uk.
‘Whilst price recovery is vital, a key factor in the health of regional markets is the time taken to market a property for sale. Further improvements in mortgage availability will undoubtedly help markets outside of London and the South East along the road to recovery,’ he explained.
‘The dazzling London market continues to perform very strongly but is, perhaps, a little too hot for comfort. With high demand sending prices spiralling in many parts and a drought of new instructions, the early warning signs of overheating are becoming all too apparent.
‘This danger has been echoed by Moody's recent warning of a renewed price bubble. A gradual improvement in confidence coupled with support from the government could well over stimulate certain areas of the country, with the London market being the clear forerunner in any such price bubble,’ he added.