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Prices up in November, claims survey

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The first property survey of the month has dampened the fires of rampant speculation that the housing market is due a downturn owing to November's increase in interest rates.

Property consulting firm Hometrack has conducted new research that claims house prices rose by a sizeable 0.6 per cent in November, up by 50 per cent on October's 0.4 per cent rise.

This means that annual growth has now risen to 5.3 per cent, the quickest rate of annual house price inflation since August 2004, bringing the average property in England and Wales to £169,600.

Richard Donnell, Hometrack's director of research, said that there has been a "sustained increase" in market activity in the latter third of the year and that much of this has been down to the ripple effect; sharp price rises in London and the south-east gradually influencing surrounding areas and spreading outwards across the nation.

Mr Donnell added that it was important to view the figures "against a background of dwindling supply" as this is thought to be a primary reason why prices are continuing their seemingly relentless climb.

Significantly, he noted: "Buyers may have shrugged off the August interest rate rise, but the prospect of a further increase in November seems to have forced those who were thinking of moving to actually do so."

This may suggest that the current boom is the last-gasp shoot upwards before the bubble finally bursts.

Indeed, this appears to correlate with the opinion voiced yesterday by Ray Boulger, senior technical manager at John Charcol.

"The most important factor influencing house prices is interest rates, so to have interest rate increases within the space of three months is bound to have an impact," he said, before concluding resolutely, "there will definitely be a crash".

However, the Hometrack survey found that the volume of sales agreed by agents was up 4.8 per cent on average – the biggest rise was in the south-west of 12.3 per cent – meaning that there are now fewer properties available for purchase.

Mr Donnell concluded: "The growth in sales means that the supply of homes on the market has declined over November by 3.3 per cent, the sharpest decrease for a year."

Although this may not seem especially news for those buy-to-let investors looking to cash in on the current boom, the sharp fall in supply is likely to become the determining factor in house price growth in the near future (as opposed to interest rates) and so homeowners can bank on property price growth in the coming months.

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