Average prices increased by 0.7% in February, up from 0.3% in January, the data from Hometrack shows. The firm says that the clear trend over the last 12 months has been for all regions to move into a positive balance between price rises and falls and this is driving the broadening recovery recorded by the survey.
London and the South East continue to deliver the over riding impetus for headline price growth and both registered above average growth of 1.1% and 0.9% respectively in February. All other regions registered higher prices over the month but the rate of growth is more muted with buyers remaining cautious and prices rising slowly off a low base.
The balance between areas registering price rises and falls on a regional basis indicates the relative strength of price increases between regions. London has a strong positive balance of +86 between areas registering price rises and falls. However, the Northern and Midlands regions have a smaller balance of +17 but this is a material improvement on recent years, the index report points out.
It also shows that levels of demand for housing registered a strong seasonal increase in February, rising by 17%, the highest monthly increase for two years. The majority of regions registered double digit increases in demand as market sentiment improves on the back of stronger house price growth and promotion of the Help to Buy scheme.
The importance of low mortgage rates tends to be underplayed but this is an important factor enabling households to purchase homes and bid up the cost of housing with average mortgage rates approaching half the level they were seven years ago, the report also points out, adding that a greater availability of higher loan to value mortgages has opened up the pool of demand further and this is supporting higher volumes of lending and market transactions.
It also suggests that higher levels of market activity, especially from existing home owners, are starting to have an impact on levels of supply coming to the market. Property listings grew by 11.2% in February the highest monthly increase for almost seven years.
However, the report says that while this increase is very welcome news, the supply of homes is growing off a low base and will need to expand much further to narrow the gap between supply and demand and ease the upward pressure on prices.
The proportion of the asking price achieved continues to increase and stands at 95.8%, up from 95.3% in January. The greater the measure grows above 93% the stronger the level of price appreciation. In London the measure is close to its all time high and currently stands at 98.8%. The largest differentials between asking and achieved prices are in the East Midlands and Wales where the proportion is still below 94%.
Looking ahead the report predicts that market sentiment looks set to remain positive and this will encourage more buyers into the market supporting the usual seasonal upturn in market activity.
But it also says that there are signs of a supply response and it will be interesting to see if this can be sustained. The upward pressure on prices will only start to moderate if we see a sustained increase in supply or if demand were to weaken which seems unlikely in the near term given the low level of mortgage rates.
‘The housing recovery continues to spread across the country, building on the momentum that started a year ago. The latest survey shows that house prices increased across 51% of the country in February, the greatest coverage of house price growth for almost a decade,’ said Richard Donnell, director of research at Hometrack.
‘This shows the extent to which market sentiment has improved in the last 12 months. The continued imbalance between supply and demand indicates we can expect further upward pressure on prices in the months ahead,’ he added.
