'Chronic' lack of supply driving higher house prices, says Hometrack

House prices rose this month, Hometrack reported. Separately, the Land Registry reported house prices in England and Wales up by an average of 3.4% from September last year to September this year, even though house prices in Wales fell by 1.7%.

According to the Land Registry, the average house price last month was £167,063. In London, it said house prices went up 9.3% over the year.

The Land Registry’s latest sales volume data – for July – showed a significant annual improvement. It said there were 69,141 house sales, up 17% from the 59,141 in July 2012.

Meanwhile, Hometrack said that while the gap between supply and demand has widened further, properties are taking longer to sell – pointing to increasing buyer “sensitivity” over prices.

It said that while talk of a national housing price bubble is overdone, it could start to impact on market sentiment and the willingness of buyers to pay higher prices.

It also said that longer sales periods are likely to be a combination of a reduced quality in the stock of homes for sale, plus increasing buyer sensitivity in the face of strong price rises and the widespread debate over a housing bubble.

Average time on the market is now 8.3 weeks, up from 7.9 weeks last month.

The property information group said that in the last two months, supply has contracted by 2% and demand gone up by 3%. It said prices have gone up in all regions apart from the north, where they are static. In other regions outside London and the south-east, prices have been rising only slowly.

Richard Donnell, Hometrack’s director of research, said: “A chronic lack of supply is driving price growth. The supply of homes for sale fell by 1.6% in the month, following a 0.3% decline in September. Growth in new sales being agreed is running at 4-5% per month and this is continually eroding the stock of homes for sale.

“In contrast, levels of demand have grown by 3% in the last two months.”

He went on: “In the face of short supply, agents will continue to push asking prices ahead, but the question is how much further buyers are willing to go to meet higher prices.

“Vendor expectations over prices are increasing and new supply is likely to come on to the market at higher prices.”

Meanwhile, property consultancy CBRE is forecasting that national house prices will rise 17% over the next five years.

The market will be boosted by Help to Buy, low interest rates and improvements in the mortgage market.

With most favourable economic conditions in southern England, CBRE expects house prices in London, the south-east and east of England to show most growth.

Jennet Siebrits, head of residential research at CBRE, said: “We expect the second phase of Help to Buy to be a game changer and anticipate it will help in the region of half a million prospective buyers who are seeking to enter the property market.”