Lack of property boosts asking prices

Asking prices for houses in England and Wales experienced their biggest monthly increase since April 2007, according to Rightmove.

The research revealed that asking prices rose 3.2% during February, with Rightmove saying a lack of supply was a major contributing factor.

The lack of property pushed the average cost of a home up to £229,398, 6.1% higher than a year earlier, while asking prices in London were up 5% on the month and rose to a record high of £427,987.

However, Rightmove warned the pace of the increase was unsustainable given the limited amount of home purchase finance available after the credit crunch. It said the economic fundamentals could not support further price increases on the scale of January's increase.

It added that 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.

Rightmove also pointed out that the number of homes for sale was slowly beginning to increase, with 90,000 new listings put on its website during the month. This was almost 20% higher than in January 2009. Despite the improvement, new property listings are still 37% below levels seen for January between 2005 and 2008.

Miles Shipside, commercial director of Rightmove, commented: "A price jump of over 3% is more 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.

"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. If sellers return to the market in larger numbers the current upwards price pressure will not be sustainable with the restricted number of buyers."

The survey was based on asking prices for new property added to Rightmove's website, which covers 90% of UK sales, between January 10 and February 6.