Money News
House prices have risen by 0.4% over January, driven largely off the back of the London market, according to the latest monthly housing survey from Hometrack, the housing information business. The survey reveals that the year on year rate of growth in house prices now stands at 6.0%, the highest since July 2003.
The pick up in market activity over the last 12 months has also seen the average time to sell a property fall from 8.1 weeks to 6.7 weeks with the proportion of the asking price achieved increasing from 93.9% to 95.1%.
The strong price growth in London is directly related to the lack of supply of housing for sale and continued demand from buyers who are less constrained by affordability - a sizable proportion of growth in the capital being concentrated in the higher value areas of central and western London where buyers are more equity driven. But commuter areas adjacent to London, such as Buckinghamshire and Essex, have also seen above average price rises.
According to Hometrack the impact of the recent interest rate rise on demand has yet to be seen. And given a lack of housing for sale there is likely to remain a steady upward pressure on house prices over 2007. This ongoing lack of supply is a result of the high cost of servicing mortgage debt in a low inflation environment. Together with high house prices this is limiting the ability of homeowners to move and is consistent with the low levels of housing turnover - averaging 6% pa - seen over recent years.
"It is hard to identify any factors that would result in an increase in the supply of homes for sale in the short term," comments Richard Donnell, Hometrack's director of research.
"Controlling house price inflation at the moment is all about managing demand. And interest rates are a blunt tool that are as much about impacting on market sentiment as affordability levels. The Bank of England will hope that the early move on interest rates will make households think twice about entering the market," he adds.
29 January 2007 © Moneyextra.com
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