However, Richard Donnell, Hometrack’s Director of Research, cautions that price rises alone are not indicative of strong foundations with 2010 seeing one of the slowest starts to the year.
Commenting on the survey Donnell says:
“A lack of housing for sale is keeping an upward pressure on house prices. This is being re-enforced by sellers and agents. All the recent talk of a housing recovery and positive year on year growth has increased sellers’ expectations of achieving a good price for their property.
"And agents in an attempt to win instructions and re-build that all important pipeline, are trying to meet those expectations by being competitive on pricing. As a result there are signs that higher priced supply is coming to the market but whether this stock will sell remains to be seen as the growth in sales volumes and demand over the first two months of 2010 is well down on previous years.
“February is traditionally a month when the Hometrack survey registers significant growth in the number of sales agreed - over the last eight years the growth in sales agreed over February has averaged 30%.
"Yet this year the number of sales agreed has averaged just 10% - see chart 1 below. A decline in January, together with February’s modest 10% increase, is part of a similar pattern seen in recent housing sales and mortgage lending data.
“While it is important not to read too much into one month’s set of figures, the survey also reveals below average increases in both the amount of new housing for sale and new buyer registrations. The supply of homes for sale may have grown by 4.6% but the average increase over the same month in previous years has been 14%.
"Buyer registrations have increased by 8.3% this month compared to an average of 24% in the same month over the last 8 years. Despite the broad evidence of sluggish market activity, price pressures are feeding through more strongly than was the case in the second half of 2009. Average prices are up 0.3% over February and by 0.4% in the last 12 months – the first year on year rise since March 2008.
"The survey also shows that prices have risen across 25% of postcodes - a level not seen since 2007.”
Continuing the theme of last year, southern England continues to see the greatest upward pressure on prices with average values in London up by 0.7% in the month - the highest monthly increase in the capital since June 2007 just before the start of the downturn.
Agents in London reported prices up across over half the market while increases were registered across more than 30% of the South East and South West regions. In the north of England, the Midlands and Wales prices increases were limited to less than 10% of the market
Donnell comments:
“There seems to be something of an imbalance in current market trends. Agents are reporting increases in achievable sales prices against a backdrop of below average increases in market activity. We believe any correction of this imbalance lies on the supply side - particularly in the number of new homes coming to the market.
“Many agents have cited the worst winter for many years and the end of short term relief on stamp duty as reasons for the slower start to the year. However, Hometrack’s analysis of transaction volumes over 2009 by price band shows that the stamp duty impact is probably being overstated with no clear evidence of a major increase in sales between £125,000 and £175,000 over 2009.
“One factor that has been overlooked is the stock of property for sale on agents’ books. The strong end to 2009 saw growth in sales volumes running well ahead of new supply coming to the market for sale. Over the last six months of 2009 the supply of homes for sale grew by just 1% while sales volumes increased by 20%.
“Agents became low on stock towards the end of last year and have started 2010 with a smaller order book than they would like. While the supply of housing for sale has grown by 6% over February there is a real need for agents to win more instructions to satisfy the expected increase in demand over spring.
"A firming of the market over the last 12 months and reports that prices are now rising year on year may entice previously reluctant vendors to put their homes on the market. Anecdotal evidence suggests that competition to build sales books is resulting in higher asking prices in an effort to win new instructions.
"The supply of homes for sale may continue to rise but the key issue is whether buyers will be prepared to commit at these new levels. The proportion of the asking price being achieved has risen from 88% 12 months ago to 93.8% today and agents seem willing to push asking prices further to test the market.
“A shortage of properties for sale has supported prices over the last 12 months but there is a danger that the pressure to gain instructions may result in the gap between asking and achieved prices starting to widen again.”
