This is the highest monthly increase in prices since May 2004 and brings the annual rate of growth to +6.4%. The survey also found that concerns over interest rates and a limited availability of housing for sale are acting as major constraints on supply.
Over February the number of properties being registered with agents grew by 14% yet there was a 23% increase in the number of buyers looking to purchase. The net result of this has been higher house prices across 42% of the country with two thirds of the price rises concentrated in southern England (London, the South East and South West).
While house prices in London and the South East grew by 1.3% and 0.9% respectively, growth across the rest of the country remained far more subdued. Average prices grew by just 0.1% in the East Midlands, Yorkshire and Humberside and Wales. The selling time in these regions remains above average at 7+ weeks, this compared to London where the figure has continued to fall and now stands at less than 2.5 weeks.
Richard Donnell, Hometrack's director of research, commented: "Despite the January rate rise it seems that a lack of supply is continuing to support higher prices, primarily in London and the South East. Below average levels of property transactions - as a proportion of overall housing stock - are also acting as a support to prices. As a result we are seeing property transactions, and pricing being set by those who can afford to move - that is to say existing owner occupiers, buy to let investors and the growing number of 'assisted' first time buyers."
In an effort to identify the factors affecting the supply of housing for sale, Hometrack asked their contributing agents what were the primary constraints being put forward by potential sellers to moving home.
Based on the responses of over 500 agents where a lack of supply was an issue, the results showed that concerns over higher interest rates (35%) and an unwillingness by vendors to put their property on the market when there was nothing suitable for them to buy (31%) came high on the list.
Secondary issues were cited as uncertainty over the impact of Home Information Packs (9%), the cost of stamp duty (7%) and buyers thinking they may get more money for their property by waiting (5%).
Donnell added: "The reality is that house prices are being set by a narrowing spectrum of buyers, chasing a limited amount of supply. In the absence of further interest rates rises we would need to see an increase in the number of properties coming to the market if the current upward pressure on prices is to be alleviated. What we're seeing here is primarily an issue for southern England with price growth in most other regions limited by widespread affordability pressures and a reasonable supply of housing for sale.
"In the absence of any external shock to demand and the apparent willingness by purchasers to pay what is necessary to access the market, then house prices look set to increase further over the coming months."
