Average house prices are now 4.3 per cent higher than they were a year ago, the fastest year on year rate of growth for two years.
Richard Donnell, Hometrack’s director of research, said: “Despite the rate increase in August, house prices continue to rise as we start the autumn selling season. Prices have risen in 9 out of 10 regions over September, largely on the back of a -0.4 per cent decline in the volume of homes available for sale over the month.”
High house prices, fully mortgaged homeowners and relatively high transaction costs, especially in southern England, are all acting as a disincentive for households to put their homes on the market. As a result, the volume of property coming to the market over the last six months has been half the level seen over the same period for the last two years. This lack of supply, set against rising levels of demand, is providing extra impetus for house prices - negating the impact of the recent increase in interest rates.
The supply/demand balance is most out of kilter in London and the South East as shown by the previous chart. Set against a background of falling supply and rising levels of demand, it is no surprise that average residential values in the capital continue to rise well above the national average. Average values in the capital grew by 0.9 per cent over September and have risen by 6.5 per cent over the last six months compared to 3.3 per cent growth nationally over the same time period. The same is true to a lesser degree in the South East where prices have grown by 3.2 per cent over the last six months and by 0.3 per cent in September.
In contrast growth has been far more subdued in most other regions where supply has been outstripping demand. As a result the impetus for house price growth has been far more limited. Average values in the East Midlands, the North and Yorkshire and Humberside regions have all been below 1 per cent over the last six months.
Whilst London has been the engine for headline house price growth throughout this recent mini boom there are signs that, despite a lack of homes coming onto the market for sale, pricing levels in the capital are coming under pressure. The latest Hometrack survey shows that the average time taken to sell property in the capital has remained unchanged over the last month and the proportion of the asking price that agents are achieving has declined for the third month in a row to 95.6 per cent. This fits with the fact that the extent of price rises across London are also continuing to slow with prices up in 63 per cent of postcode areas compared to 75 per cent in April and 67 per cent in August.
“The lack of new homes coming to the market is acting as a support for house prices at the moment but there are growing signs of price resistance, especially in the market where values have grown the most in recent months,” Donnell concluded. “However, prices remain unchanged in large parts of the country with affordability pressures acting as a major constraint on house price growth. Whilst the supply constraints are unlikely to disappear in the very short term, we expect the extent of price rises to continue to slow over the rest of the autumn. This will result in a continued slowdown in the rate of growth with average prices likely to be around 5 per cent higher by the year end.”
