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House price figures show sensitive supply-demand balance

4 June 2010

Two sets of house price figures published yesterday suggest an impact of the number of properties coming on to the market on house price trends.

The monthly figures from Edinburgh Solicitors Property Centre show prices last month up an average of 11.8% compared with May 2009, though a higher proportion of larger properties accounts for part of the difference. Volume of sales was up 20% and the average time to sell a house was down by about a third at just over three months.

David Marshall, ESPC business analyst said: “Towards the end of last year we were seeing prices rise, but this was due primarily to a rise in the proportion of larger properties selling. Whilst this is still the case to some extent, prices are also now inching upwards when you compare properties of similar size.

"For example, the average price of a two-bedroom flat sold during the first five months of the year stood at £183,204 – up 8.1% annually. Similarly, when you look at three-bedroom houses there has been an annual increase in the average selling price of just over 5%.”

He predicted that prices would level off over the coming months as there were now more properties on the market that had been the case for several months.

Meanwhile the Nationwide Building Society reported that UK prices rose an average 9.8% in the year to May, compared with 10.5% the previous month, due it said to a smaller month-on-month rise between April and May this year.

Its chief economist Martin Gahbauer said there was still a "relative scarcity" of properties for sale and the current supply-demand balance remained consistent with "relatively stable to modestly upward-trending prices".

Among factors likely to influence the market in the coming months could be possible capital gains tax changes in the Budget on 22 June affecting second homes, though if the rise took effect immediately there would not be time for owners to put their properties on the market in order to avoid the tax.

 

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