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UK asking prices up 0.5%

22nd January 2007 | back to article listings BACK    print this article PRINT

Asking prices for UK properties have rocketed this month, primarily due to a chronic shortage in supply, according to new research.

The average British home now goes on sale for £222,859 as prices increased 0.5 per cent in December, according to new research from Rightmove. This now brings asking house price inflation up to 13.5 per cent.

The research also claims that property stocks are now at their lowest level for this time of year since 2004 as the housing market continues to boom in spite of the threefold rise in interest rates since August.

Miles Shipside, commercial director of Rightmove, explained: "Stock levels per estate agent at the start of the year have not been this low for three years, and are 18 per cent lower than at this time last year.

"Where there are shortages of property, prices will keep increasing and properties will keep telling, in spite of the latest interest rate rise."

Smaller properties such as flats and terraces proved the biggest winners for property investors over the last quarter as the demand for new houses is heavily outstripping stock replacement.

Over the last three months, average asking prices for smaller properties – those favoured by first-time buyers – rose by over £4,000 while prices requested by owners of detached homes fell by almost £5,000 as demand for these houses moderated.

This could be down to first-time buyers' urgent need for a home and it appears that even with the climate of rising rates, buyers are still willing to put up with the financial burden to get on the property ladder.

Mr Shipside continued: "The reason house prices are defying the gravity of a six year high in interest rates is because the number of new households is growing by 50,000 a year, more than the supply of new build.

"Slowing property prices by raising interest rates several times in quick succession is not only incredibly painful for existing and potential homeowners' mortgage payments, it's a high risk strategy for the economy given the possibility of rates going too high."

Furthermore, investors across the country have not been seeking the same rises in asking prices. The average home in greater London is now put on the market for £356,192, while those in the north request less than half this amount, £153,610.

Prices in the north-west, east Midlands as well as Yorkshire and Humberside actually fell from December, illustrating that London and the south-east is leading the country's house price growth.

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