A dwindling supply of inventory and an improving market confidence boosted the average UK house price in September, according to Hometrack, which provides information services to the mortgage industry.
As housing prices show signs of better than expected growth in the US, according to Radar Logic, the UK market shows similar signs of improvement. The average price climbed to £156,100 ($248,892) or 0.2% from August but stayed 5.6% below the level in September 2008. In August, the average house price bumped 0.1% from July and 6.7% from the year before.
Despite the talk of general improvement in property and equities, which has boosted a positive outlook on the market, questions arise as to whether or not the recent surge in activity will continue, said Richard Donnell, director of research at Hometrack.
“A sustainable housing market recovery cannot be built on the back of price rises, driven off what is a short-term supply/demand imbalance,” he said. “The reality is that constrained mortgage availability and expected increases in unemployment are set to act as a drag on demand across large parts of the market.”
The price jumps over the last two months concentrate in London and the South East, Hometrack reported. Only 15% of postal codes saw an improvement in price growth, while 85% reported unchanged prices. Prices gained 0.4% in London and 0.3% in the South East, according to Hometrack.
The low sales volume and scattered housing on the sales block will likely continue to support the gains in London and the South East for the rest of the year, but prices in the rest of the country are set to track sideways, Donnell said.
But unlike the UK’s inventory shortage, the flight of foreign buyers led to a massively oversupplied housing market in Spain, burdening the Costa del Sol region in particular. In Spain, the cost of a home mortgage fell 18.3% in July from last year and 2.3% from the month before. But mortgage cancellations fell by 23%, according to the Instituto Nacional de Estadística (National Statistics Institute).
Write to Jon Prior.