Rightmove: England and Wales house prices up 3.2%

The England and Wales housing market saw a stark reversal of recent fortunes during February, with average asking prices up 3.2 per cent.

The figure is in contrast to the 0.8 per cent fall in prices in January.

The conclusions are included in the latest Rightmove house price index, which also finds annual inflation in the market now stands at 5.8 per cent.

Again, this is up from 3.4 per cent in January.

Every region in England and Wales saw prices increase – excluding the north-east – with the East Midland and south-east leading the way, with price increased of 5.8 and 4.8 per cent respectively.

London saw prices rise by a relatively modest 0.9 per cent.

While Rightmove argues the upsurge in asking prices is customary for the season – with fresh sellers tempted to test the market at a higher price as they have fewer timescale pressures – the number of sellers has been falling.

Estate agents were competing for only 132,000 properties in January this year, compared to 144,000 in February 2007 and 155,000 in February 2006, according to the online property portal.

However, the introduction of home information packs (Hips) for all properties on December 14th, 2007 may still be having a distorting impact on the market – making asking price inflation appear artificially high.

With sellers potentially discouraged from entering the market by the cost of a Hip, supply has been limited – which in turn has allowed demand pull inflation to force prices higher.

Without this phenomenon Rightmove finds the average rises in asking price would have been between 1.5 and two per cent - more in line with the traditional February bounce.

"Most sellers obviously want to achieve as much as possible for their property, and traditionally they choose to test a more ambitious price early in the year as they have plenty of time to adjust it down later," said Miles Shipside, commercial director of Rightmove.

"This is compounded by estate agents being eager to have fresh property on their books and there being fewer to go round, leading to the temptation to try a higher figure."

Interest rate cuts – of 0.25 per cent in both December and February – have also provided a catalyst to the market, according to Rightmove.

However, there were some sings of continued disruption in the market.

For example, the average time a property sits on the market before being sold continues to be at historically high - with an average of 93 days compared to 78 days a year ago.

Commenting on the figures Howard Archer, of analysts Global Insight, said: "While the spike up in asking prices this February was admittedly pronounced, it followed particularly marked recent falls and may well be the consequence of sellers pushing their luck in the hope the recent interest rate cuts will boost demand."

Yet, the figures suggest the market is returning to an even keel, according to some analysts.

"Rightmove's latest figures offer yet another indication confidence is returning to the market. This latest rise in prices, combined with February's interest rate cut should fuel further optimism among both buyers and sellers, with increased activity expected over the coming months," said Stuart Law, or property experts Assetz.

"However, while I would expect to see further house prices rises this spring, the Bank of England cannot afford to take its foot off the pedal. Its latest rate cut is not enough to resolve the recent turbulence experienced in the market and we need to see further rate cuts to ensure this renewed home buyer confidence in maintained," he concluded.