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Asking prices rise in UK amid shortage of homes on market

Transaction values rise 2.1 per cent in a month, but scarcity of properties masks weak demand

PUBLISHED : Wednesday, 17 April, 2013, 12:00am
UPDATED : Wednesday, 17 April, 2013, 5:31am

British home sellers have raised asking prices for a fourth consecutive month amid a shortage of properties for sale, according to Rightmove.

Prices sought rose 2.1 per cent this month from March to an average £244,706 (HK$2.9 million), the property-website operator said. In London they fell 0.5 per cent. Asking prices increased 6.9 per cent in the first four months of the year and were up 0.4 per cent year on year.

The scarcity of homes on the market is supporting prices and masking the weakness of demand in many areas as Britain risks falling into a third recession in five years.

In his budget last month, Chancellor of the Exchequer George Osborne pledged £3.5 billion of loans plus £130 billion of guarantees last month to spur housebuilding and help people struggling to afford a home.

"With mass-market buyers still sitting on the sidelines, the size of the active market is a lot smaller, making it easier for an upswing in activity to feed through to an upturn in prices," said Miles Shipside, director at Rightmove. "This should not be confused with an overall market recovery, as while spring may be here the ongoing chill of the recession is still in the air."

The number of properties advertised for sale nationwide fell 4 per cent from a year ago, the report showed.

Sellers in eastern England led the increases, raising asking prices by 4.4 per cent this month, followed by 3.9 per cent increases in Wales and southwest England, Rightmove said.

In London, sellers reduced average asking prices for the first time this year to £493,635, though prices remained 6.2 per cent higher than a year ago.

In a separate report, Ernst & Young's Item Club said the government had "got the message", noting the measures to help the mortgage market announced by Osborne in his March 20 budget.

They follow the Funding for Lending Scheme, introduced by the Bank of England last summer to boost credit.

In the report, Item cut its 2013 economic growth forecast to 0.6 per cent from 0.9 per cent in January and said weak demand in Europe will hold back Britain's recovery. It sees growth accelerating to 1.9 per cent next year and 2.5 per cent in 2015.

"With export markets continuing to disappoint, the chancellor has focused his firepower on the home front," said Peter Spencer, chief economic adviser to Item.

"Although it's not a long-term strategy, stimulating the housing market and the high street will keep gross domestic product growth positive. Unbalanced growth is better than no growth."

Item said it expects the "Help to Buy" programme to be "popular" because of pent-up demand for new-build homes.