Asking prices for UK residential property are 6.1% higher than a year ago after the biggest monthly increase since April 2007, according to the latest figures to be published.
The average asking price nationwide in February was up 3.2% on January and is now at a non-seasonally adjusted £229,398, according to the date from Rightmove.
London property prices increased 5% on the month to a record £427,987 and are now higher than at the peak of the property boom in 2007 after a 10.3% rise over the past 12 months.
However, Rightmove said this pace of increase was not sustainable given the limited amount of home purchase finance available after the credit crunch.
‘This market is more akin to the mortgage-rationed times of the 1970s and 1980s than to more recent times of relatively easy mortgage availability,’ said Rightmove’s commercial director Miles Shipside.
‘If sellers return to the market in larger numbers the current upwards price pressure will not be sustainable with the restricted number of buyers,’ he added.
However, Rightmove said that the economic fundamentals could not support further price increases of this magnitude and is concerned that in some cases the rise may have been caused by estate agents going along with sellers’ perceptions of what their property is worth in order to win business.
‘A price jump of over 3% is comparable to the pre-credit crunch boom times. Sellers are setting their sights higher and some agents are going along with them in order to win scarce instructions,’ said Shipside.
He added that the number of homes for sale was beginning to increase slowly with 90,000 new listings added to Rightmove, nearly 20% higher than in January 2009, although figures for that month were distorted by the introduction of a ban on marketing a property until the seller had a Home Information Pack.
But despite the improvement, new listings remain 37% below levels seen for Januaries between 2005 and 2008. Some areas also continue to have an acute supply shortage, with stock levels 45% and 43% lower in East Anglia and the South East respectively than between 2005 and 2008.
The Rightmove data is not the only indicator of possible recovery. The National Association of Estate Agents reported last week that its members sold an average of six properties in January, compared to five in December, despite the atrocious weather last month.
‘Our figures suggest that concerns expressed about the prospects for the market in 2010 may prove unfounded. This appears to be confirmed by the increased level of sales, which given the awful weather conditions is quite amazing. The dwindling housing stock on our members books reflected the increase in sales month on month, but this is a worrying trend that if continued will result in further upward pressure on prices,’ said Gary Smith of the NAEA.
‘More encouragingly, the very important first time buyer section of the market now makes up almost one in four purchases. This confirms their confidence in the market as well as their ability to obtain attractive mortgage deals,’ he added.