Economy 'not strong enough' for steep rise in house prices

Property asking prices have risen 3.2 per cent over the past month - a leap the economy cannot support, according to a homes website.

The jump in the four weeks to 6 February was the biggest increase in asking prices for homes in England and Wales since April 2007, Rightmove said.

It pushed the average cost of a home up to £229,398, 6.1 per cent up on a year earlier, while asking prices in London rose to a record high of £427,987.

The website said rises may have been caused by estate agents going along with sellers' perceptions of what their property was worth to win business.

Miles Shipside, commercial director of Rightmove, said: "A price jump of over three per cent is more comparable to the pre-credit crunch boom-times. Sellers are setting their sights higher, and some agents are going along with them in order to win scarce instructions."

Rightmove said the number of homes for sale was slowly increasing, with 90,000 new listings put on its website during the month.

This was nearly 20 per cent higher than in January last year, although figures for that month were distorted by the introduction of a ban on marketing a property until the seller had a Home Information Pack.

New property listings are still 37 per cent below levels for January between 2005 and 2008. There are also acute homes shortage in some areas, with stock levels 45 per cent and 43 per cent lower in East Anglia and the South East than between 2005 and 2008.

Asking prices increased in all areas of England and Wales apart from the South West, where they fell by 1.7 per cent, and the North and North West where they dropped by one per cent and 0.4 per cent. The biggest rise was in the West Midlands at eight per cent, while they increased 7.5 per cent in East Anglia.

Mr Shipside said: "Sellers are starting to appear in greater numbers, but they must realise this market is more akin to the mortgage-rationed times of the Seventies and Eighties, than to more recent times of relatively easy mortgage availability."