The supply of homes for sale increased by 7.5% - the highest monthly increase for 3 years. Agents reported a 25% increase in sales agreed over February which, once exchanged, will reduce the available supply of homes for sale in the months ahead. This will support pricing levels so long as demand does not weaken significantly in the near term.
A decline in the supply of homes for sale over the last six months together with a modest re-pricing of housing has created an environment where sales are progressing between willing buyers and sellers. This is supporting sales volumes, which is vital for price stability.
Average prices fell by -0.2% in February, the lowest monthly decline for 6 months. The proportion of the country posting price falls has declined for the last 4 months. Lower prices were reported across 26% of the country compared to 37% in January and 57% in October 2010.
Prices rose across 4.8% of the country in February. The modest improvement in underlying pricing is highlighted by the proportion of the asking price achieved increasing for the first time in 12 months to 92.4%, up from 91.9% in January 2011.
The time on the market also fell in February and stands at 10 weeks, down from 10.2 weeks in January 2011. On a regional basis prices were static in London, the first month prices haven’t fallen in the capital for 7 months. Across the other regions the rate of price falls slowed apart from the North where falls increased to -0.5%.
The strongest market conditions were seen in the South of the country. There is a growing gap in the time on the market between the Southern regions (8.6 weeks) and Northern regions (12.1 weeks) reflecting the differing supply/demand balance. That said the market remains highly fragmented at a local level.
Richard Donnell Director of Research at Hometrack. the property analytics business, said:
“This latest survey of over 5,000 agents and surveyors shows a marked rise in levels of both new buyer demand and sales agreed over February. The strongest market conditions were registered in Southern England.
"This is the first increase in demand for housing for 8 months and represents a mix of seasonal and pent-up demand feeding back into the market after a 20% decline in buyer numbers over the second half of 2010. House prices in February fell by -0.2%, the lowest monthly decline for 6 months.
"Weak market conditions over late 2010 did bring some benefits, not least a rapid tightening in supply and a modest re-correction in pricing levels. While the number of new homes coming to the market has grown by 7% over February, the 25% increase in sales agreed will further erode supply and support the continued decline in the rate of price falls.
"This in turn will lead to improved price stability in the short term. Lower price falls will be sustained if demand for housing continues to grow in the coming months and February’s increase proves to be more than a seasonal blip.
"The reality is that the outlook for the market remains finely balanced. With supply likely to remain in check, it is the outlook for demand that will have the greatest impact on pricing levels and market activity in the coming months.
"We expect a continued modest pick-up in demand over March but the timing of interest rate rises is critical. Any interest rate rises in the near term are likely to impact market confidence to a greater degree than affordability.
"The February survey shows a relatively strong seasonal pick-up in demand compared to recent years. There was a 14.7% increase in new buyers registering with agents - the highest monthly increase for 2 years.
"This is in stark contrast to the significant fall in demand over the final 6 months of 2010. It is likely that a significant proportion of these buyers reflect an underlying demand carried over from the second half of 2010.
"Similarly, February saw an increase in the supply of new housing coming to the market - up 7.5% - the highest monthly increase for 3 years. To a large degree this relates to the number of new homes coming to the market and the fact that many sellers are also would-be buyers.
"It may also reflect an increase in the volume of owners wanting to sell in advance of anticipated price falls over the course of 2011."
