National house price picture skewed by just three regions

Property prices saw the first monthly increase in more than a year in August, but housing shortages in the South are skewing the national figures.

The overall rise of 0.1 per cent – which follows three consecutive flat months – was driven by just 11 per cent of the country, with only London, East Anglia and the South-east seeing prices going up, a report published by Hometrack today says.

With three-quarters of all growth accounted for by London and the South-east alone, experts attribute the appearance of green shoots to a shortage of supply rather than sellers' confidence in the market or a significant loosening of the crunch-struck mortgage market. In the capital, prices climbed by 0.3 per cent in August, after four months that have seen a 2.6 per cent fall in homes for sale and a massive 34 per cent rise in demand. Similarly, the number of houses on the market dropped by 5 per cent in the South-east.

Richard Donnell, director of research at Hometrack, said: "Taken at face value these headline results provide further support to talk of the green shoots of recovery, but dig beneath the headlines and the reality is quite different."

Fundamental obstacles to recovery remain, including problems with mortgage availability for first-time buyers and rising unemployment. "There is a danger that an increasingly severe shortage of housing for sale in a relatively limited number of markets is impacting on prices and the headline performance of the housing market, creating the impression of a national housing market recovery," Mr Donnell said.

The warnings come against a background of growing optimism about the property market. Official figures from the Land Registry last week showed prices leaping 1.7 per cent in July, pushing the value of the average home to £155,885.

Mortgage approvals from major high-street banks area are also on the rise. In July, more than 38,000 home loans were agreed, a 77 per cent year-on-year rise. But although the number of mortgages hit a 17-month high, the total value is still down 39 per cent against last July.