Demand for houses increasing by 10.2 percent over the last six months and supply declining by 0.6 percent has led to a rise in house prices says Hometrack in its monthly national house price survey.
In the last month alone house prices have increased by 0.5 percent on the back of a 3 percent increase in demand compared to a decrease in supply of houses for sale of 3.5 percent.
And it’s not just demand. Another major driver is that houses are also selling faster than they are coming onto the market so eroding the stock of homes available for purchase.
Market sentiment, says Hometrack, has been given a boost by low mortgage rates and the publicity around the Help to Buy scheme.
Hometrack goes on to say that ‘wide regional variations exist’ between London & the South East where a huge demand/supply mismatch exists resulting in price rises of 4.8 percent and 3.2 percent respectively. Whereas in the North where the balance is more even prices only rose 0.5 percent over the last six months.
Richard Donnell, Director of Research at Hometrack said:
“While the scale of house price growth varies, the overall trend is that a growing number of markets are seeing a general trend of rising prices. In November 46% of postcodes saw prices rise, the highest level for over 9 years (July 2004). Figure 1 shows the balance between areas registering rising and falling house prices on a regional basis. The balance has been strongly positive in London for the last 6 months. The sense of a housing recovery is being built off a shift from a negative balance of falling prices over 2010 to 2012 to a positive balance with prices rising off a low base as demand picks up. Much of the growth outside London remains muted and far from what could be described as a ‘housing bubble’.”
Key Points from the Hometrack survey:
• House prices increased 0.5% in November on rising demand and contracting supply.
• Demand for housing grew by 3% while the supply of homes for sale declined by 3.5%.
• Over the last six months demand has grown by 10.2% yet supply has declined by -0.6%.
• The supply/demand balance varies by region. The greatest imbalance and highest price increases are in London and the South East where prices are up by 4.8% and 3.2% in six months. In contrast the balance is smaller in northern regions where price growth has been less than 0.5% over the same period.
• The major change in the last 12 months has been a shift from falling house prices in regions outside London to prices rising steadily off a low base as demand picks up. Much of the house price growth outside London remains muted and far from what could be described as a ‘housing bubble’.
• The average time on the market nationally is 8.4 weeks. Seven out of ten regions have an above average time on the market of over 10 weeks. London has the lowest (3.6) followed by the South East (5.0).
• The percentage of the asking price achieved was down slightly from a recent high of 95.2% to 95%. The softening was seen in regions outside London and suggests early signs of increasing price sensitivity.
• Help to Buy has delivered a confidence boost the market. The impact of the new build part of the scheme on general house prices is limited as it supports less than 3% of all sales. The impact of the mortgage indemnity part of the scheme could well fall short of expectations given the higher cost of these mortgages.
• While Help to Buy has boosted sentiment and increased activity, low mortgage rates have provided homeowners more ‘buying power’ than at any time previously. The change to Funding for Lending is likely to result in mortgage rates drifting higher. This will scale back the potential buying power of households which is important to keep price rises in check.