Low rates are propping up house prices

 
Julian Harris
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HISTORICALLY low interest rates and a weak supply of new property listings are boosting asking prices for UK homes, according to a leading survey released today.

Asking prices on newly listed houses have almost hit a three-year high, according to the Rightmove <a href="http://www.cityam.com/house-prices";>house price</a> index, jumping 1.7 per cent in April and 1.3 per cent so far this month.

The average listing price for new sellers is now £238,874 across the UK – only 1.5 per cent below an all-time peak in May 2008.

In London, the latest average house price stuck at around £431,000 this month, up 2.6 per cent from the same time last year.

“With Bank of England base rates held at record low levels for the 26th consecutive month, new sellers coming to market continue to postpone tough decisions on price, and are now on average asking their highest prices since June 2008,” the report said.

Given persistently high levels of inflation, however, asking prices are “down by around 10 per cent in real terms” from their peak, Rightmove says.

The Royal Wedding and other bank holidays could have stunted supply in the housing market, causing prices to be hiked further.

“A slump in seller numbers leads to some estate agents competing for new instructions by agreeing to market at unrealistic prices,” the report explains. Despite a pick up in some areas, the overall UK housing market remains in a “low transaction limbo”, Rightmove said.

“Continuing demand for good quality property in better areas and a lack of pressure to sell have enabled prices to appear to defy gravity,” it added.

In the capital, new property listings plummeted by 30 per cent over the extended bank holiday period, falling from around 4,300 per week to roughly 3,000 per week.

Prices in London have defied the slump in the rest of the UK, with new asking prices jumping by 5.4 per cent so far in 2011, according to Rightmove.

Houses north of the river Thames are mainly responsible for dragging prices upwards, according to separate research by property consultant Chesterton Humberts.

North London’s average price was up 1.2 per cent from the same time last year, its survey said, compared to just a 0.2 per cent rise in south London’s house prices.

House prices in north London are on average £62,345 higher than in south London, it claimed.