Percentage of asking prices achieved highest since 2004

Property buyers are paying the highest percentage of asking price since 2004 as demand outstrips supply, according to the latest Hometrack monthly national housing survey.

The survey found that London buyers are now paying over 99% of the asking price with properties taking an average of just 2.7 weeks to sell.

Richard Donnell, director of research, at Hometrack said: House prices increased by 0.6% in March with the growth in demand outstripping supply. Half of the country registered a price increase in March for a second month in a row. The proportion of the asking price being achieved reached a 10-year high at over 96% while in London the percentage is over 99% as a broad mix of buyers chase a scarce supply of homes for sale.

Much has been made of the impact of Help to Buy but the overall volumes of sales supported by the scheme remain relatively small. The real driver of higher house prices is record low mortgage rates and strong demand from first time buyers and investors who have no property to sell which is compounding scarcity. With average mortgage rates currently at 3% or lower, compared to over 5% before the downturn, households have seen a significant boost to buying power.

Hometrack reports that the number of new buyers registering with agents grew by 6.6% in March. In contrast, the supply of housing for sale expanded by just 1.9% over the month. Strong sales volumes are eroding the stock of homes for sale. The gap between supply and demand has been extended for the last five months and points to further price rises in the months ahead.

The latest survey also shows the recovery in house prices continues to spread away from London and the South East. The year-on-year rate of growth is now in positive territory across all regions for the first time since 2006. However, in four regions the rate of house price growth remains below 2% with prices rising slowly off a low base (North, North West, Yorkshire & Humberside, East Midlands).

While market conditions are improving it is important to note that there are large parts of the housing market with limited impetus for price rises as falling incomes, slower employment growth and limited access to credit constrain demand, says Donnell, The markets that are starting to recover in the regions outside the south tend to be those in the higher value areas where buyers have more embedded equity in their homes.

Improving market conditions are being reflected in the proportion of the asking price achieved and time on the market indicators. The time on the market continues to improve and now stands at less than 8 weeks (7.9) for the first time since October 2007.

The proportion of asking price achieved is currently 96.2%, the highest level recorded at a national level since 2004. The level is extremely high in London at 99.3% highlighting the strength of demand and scarcity of supply. Across all regions the measure is above 93% and pointing to further price rises.