UK house prices up by 0.4% in May, latest Hometrack data shows

House prices in the UK grew by 0.4% in May, the highest increase in a single month since May 2007 but price growth is uneven, being driven by London and the South East of the country, the latest index shows. The data from Hometrack shows that prices in London have increased by 0.9% in May and by 0.5% in the South East. But excluding these two areas the overall rise of just 0.1%.

While the growth in buyer numbers is following a similar pattern to recent years, it is a lack of housing for sale that is acting as the primary driver of price rises, says Hometrack.

The number of sales agreed is outstripping the number of new properties coming to the market. Nationally, new supply grew by 2.8% in May while sales agreed were up 8.2%.

The gap between supply and demand in London is the largest it has been since spring 2009. In the last six months demand has grown 15% while supply has declined by 0.6%.

Across the rest of the country the trend in prices is upwards with demand rising ahead of supply, albeit at a lesser extent than in London and the South East. Prices were static in four regions; the North East, North West, Wales and Yorkshire and Humberside, and grew in a further four; East Anglia, the East Midlands, the South West and the West Midlands.

But there are encouraging signs. For example, the average time on the market has fallen back to 8.8 weeks, the lowest level since July 2010, but there are regional variations. The sharpest falls in time on the market have been seen in Southern England at 7.2 weeks compared to around 11 weeks in the Midlands and Northern regions.

The percentage of asking price achieved stands at just under 94%, the highest level since July 2010 and the proportion of the asking price achieved has moved up to 93.9%.

‘While levels of demand for housing have been increasing each month, the total growth in buyer numbers has been broadly in line with that seen in recent years. But it is a lack of housing to buy that is driving the acceleration in prices. The shortage is being exacerbated by the rate of new stock coming to the market failing to keep pace with the number of sales agreed,’ said Richard Donnell director of research at the analytics firm.

‘Respondents to the survey reported a lack of housing for sale as one of their greatest concerns in the market at present with one reporting the lowest levels of stock for 15 years. In London the gap between supply and demand is the largest it has been since spring 2009,’ he explained.

‘High moving costs, uncertainty over the outlook for jobs and a lack of available housing to move to, means home owners remain unwilling to put their own properties on the market. This is only serving to limit supply further,’ he pointed out.

‘Talk of improving market conditions is likely to result in more marginal sellers entering the market in the coming months. The danger is that the pressure to secure instructions will lead to properties being put on the market at unrealistically high prices. This in turn will result in fewer sales and a period of price re-alignment,’ he added.

Donnell believes that the market is seeing the continuation of a series of small mini housing cycles which have been in evidence over recent years.