Average house prices rise thanks to irrepressible London market - but supply outstrips demand elsewhere

Published 28th May 2012

House price rises in London and the South continued to push average property values higher this month, leading to a 0.2 per cent rise during May, according to Hometrack.

Hometrack said prices have risen 0.6 per cent in London during May, and by 0.1 per cent in the South East and East Anglia. Prices fell or stayed the same in the North, the Midlands and in Wales.

The company said prices outside London were likely to remain static in the coming months as the number of homes on the market outstripped demand and as rising mortgage rates and concerns over the grim economic outlook continued to weigh on the property market.

Estate agents across the country saw a slowdown in the number of new buyers during the month, recording a 0.4 per cent increase compared with 2.1 per cent in April.

The volume of properties coming to market rose 2.2 per cent, outstripping the increase in new homes and indicating supply rising faster than demand.

But the pattern was reversed in London, where demand has risen ahead of supply for the last three months, demonstrating once again its relative strength in the tough market.

Across the Northern regions, the number of new potential buyers has risen by 9 per cent while the number of houses coming on the market has increased much more sharply, by 28 per cent.

In the East Midlands, the West Midlands and the South West prices remained unchanged over May, while they fell by 0.1 per cent in Wales, the North East, the North West, and Yorkshire and Humberside.

Richard Donnell, director of research at Hometrack, said: ‘Increased mortgage rates and mounting concerns over the impact of the eurozone on the UK’s economic growth and employment are likely to keep demand and prices in check as we move into summer.’

Lenders have been raising their mortgage rates for both existing customers and new ones this month, blaming the weak economy and the increased cost of funding a mortgage.

London has enjoyed strong demand from overseas buyers, but the study said that much of its latest price rise came from the largely domestic markets of south west, south east and north London, with price growth in central London being lower in May than in these outer boroughs.

The proportion of the asking price achieved was at its highest in London at 94.6 per cent and its lowest in the North East at 91.2 per cent, standing at 93.2 per cent across England and Wales.

Source: ' ThisIsMoney '

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