UK House Prices Up for First Time in a Year but No Recovery - Hometrack

Major UK house price intelligence group Hometrack has today revealed the findings of its latest research into the UK housing market.

The group said that though house prices rose 0.1% in August for the first time in more than a year, the rise is fuelled by short supply pushing up prices in some areas, not a recovery in the wider housing market.

In fact, according to the report, house prices rose in just 11% of the country, mostly in the South. In London house prices rose by 0.3% after months of 2% falls and rising demand. The fact that homes for sale in the capital fell by 5% in August says it all.

Richard Donnell, director of research at Hometrack, said: "Taken at face value these headline results provide further support to talk of the green shoots of recovery, but dig beneath the headlines and the reality is quite different."

"There is a danger that an increasingly severe shortage of housing for sale in a relatively limited number of markets is impacting on prices and the headline performance of the housing market, creating the impression of a national housing market recovery," Mr Donnell said.

The report mentioned the lack of mortgage availability for first time buyers and rising unemployment as obstacles to recovery, but of course, the short-supply itself is also an obstacle to recovery, according to Richard McKay director of UK property sales portal Zungalow.com.

"The shortage of supply driving up prices in some areas is creating false optimism in the housing market, which will prove to be bad news in the long-run. Not least because it is reversing the improvements made to affordability by the correction, leaving a further correction necessary," he said.