The mix adjusted average asking price for England and Wales has now recorded annual growth for 19 consecutive months, according to the Home.co.uk index.
The index also shows that market supply of property for sale continues to diminish, with the volume of new properties last month down 8% compared with May 2012 and down 12% compared with May 2011.
Greater London, the South East and the South West have record the highest annual price rises of 7.9%, 4.4% and 3.9% respectively.
Looking at price trends around the country, the recovery is only clearly apparent in the south. Average prices across the northern regions of England are essentially static and slightly negative in the case of the North West. In contrast with the South has recorded monthly increases of 0.8%.
The firm says that active buyers are chasing ever fewer properties as supply continues to fall. The volume of new stock on the market has now fallen for six consecutive months and total on market stock has contracted by 14% over the last 12 months alone.
In addition, a reduction in the typical marketing time for unsold property, currently 104 days, five days less than June last year, has further reduced the total volume of on-market properties, which is down 14% in the last 12 months.
Following 19 consecutive months of annual growth, the average asking price of a home in England and Wales now stands at £240,238. Over the past 12 months, prices have risen by 3.6% and, consequently, property values are now outperforming the Retail Prices Index (excluding housing), which fell to 3.2% in April 2013.
The report says that this situation will offer some relief to home owners, providing reassurance that the value of their largest asset is not eroding in the face of above target inflation. It is also great news for buyers who are able to secure low rate finance as they can be confident that their investment's capital value is growing over and above RPI.
Whilst average house prices continue to recover, vendors seemingly remain cautious about entering the market in any significant volume. For many, bricks and mortar constitute one of the safest investments in today's uncertain economic climate.
The details reveal how the north/south divide in the country persists. Across England and Wales, the average price rise equates to £8,240 over the last 12 months or £687 per month. However, these increases are largely driven by the South which benefits from both stronger price performance and higher average property values.
Whilst there is no considerable nominal price deflation in any region of mainland UK, there are enormous differences between the rates of market recovery in terms of regional pricing. In the last month alone, prices in the South have risen 0.8% in contrast to 0.5% in the Midlands, static prices in the North, 0.4% in Scotland and a fall of 0.2% in Wales.
‘The current trends are clearly showing an overall market shift in favour of vendors. Prices continue to recover and restricted supply is encouraging more competition between buyers. However, many potential vendors are still reluctant to sell,’ said Doug Shephard, director at Home.co.uk.
‘Relatively cheap mortgages, strong demand in the rental sector and rising values make property an attractive and secure investment, especially in high demand areas which attract relatively high rents and benefit from appreciating capital values. Until other investment options such shares, bonds, commodities etc, can offer a premium over and above the yields available in property, the supply shortage will continue, and perhaps worsen,’ he explained.
‘As always, the relative strengths of supply and demand will determine the rate of recovery of each local market. Given the current north/south divide, it is already obvious that the turnaround of each area of the UK will differ considerably. London, at one extreme, appears to be operating as a separate entity, bloated by Bank of England stimulus money and foreign buyers, seemingly immune to the overall economic conditions affecting the rest of the UK. In contrast, Wales and the North East continue to struggle with subdued price performance and typical marketing times that are over 60% longer than the national average,’ he added.
