House prices post strongest increase since May 2007
House prices grew by 0.5% in September, the highest monthly increase since May 2007.
Richard Donnell, director of research at Hometrack – the residential property analysts – said: “Housing market conditions continued to strengthen across the country in September 2013. Growing confidence amongst buyers, continued growth in sales volumes and a drop in the number of homes for sale pushed house prices 0.5% higher over the month – this is the strongest monthly increase in house prices since May 2007.
The impetus for higher growth is coming from a burgeoning recovery across regional housing markets, especially across the South East. Over the last few years the housing market has been split between a buoyant London market, boosted by overseas demand, and a trend of falling prices across other regions on weak domestic demand.
The survey has highlighted a steady improvement in underlying market conditions outside of London for the last 18 months. Now we are seeing continued house price growth in London combining with modest gains across other regions and creating a picture of a broadening market recovery.
Price rises were registered across 41% of the country in September, the highest coverage of price rises for 80 months (February 2007). The coverage of house price growth has accelerated in the last nine months across all regions. However, price rises remain limited to less than a third of the market in seven out of ten regions.
Renewed consumer confidence, record low mortgage rates and rising demand are driving the growing coverage of price rises.
The survey recorded an eighth consecutive month of rising demand, while the supply of homes for sale fell by 0.3% in September as continued growth in sales eroded stock levels.
The change in the supply of housing for sale varies on a regional basis with improving market conditions bringing more supply to the market in regions outside southern England. This is keeping price rises in check.
In London and the South East the growth in supply remains below average and this is putting additional upward pressure on prices.
In many markets outside London this is the first time that prices have started to register positive growth for over five years. Prices are rising off a low base and talk of a housing bubble in relation to the national market is overdone. A recovery in buyer confidence against a background of low volumes and scarcity of supply is supporting higher prices. It is important not to understate the impact of low mortgage rates and the buying power this provides to households that are looking to move. In the near term we expect prices to continue to rise but the market remains very sensitive to changes in demand and especially changing expectations over the outlook for mortgage rates.