Biggest rise in UK house prices for six years

House prices saw their biggest monthly increase for six years in May, caused by a shortage of homes for sale and rising demand - largely in the capital, a report found today.

From April prices rose 0.4 per cent, the strongest uplift since May 2007, with the drive coming 'almost exclusively from London and the South East', property analyst Hometrack said.

Prices rose 0.9 per cent in the capital, where the gap between supply and demand was at its largest since spring 2009 - while demand has grown 15 per cent in six months, supply has dwindled by 0.6 per cent. 

In the South East prices bumped up 0.5 per cent, while across the rest of the country they rose at a more serene 0.1 per cent.

Across England and Wales, the volume of homes coming onto the market grew by 2.8 per cent in May, but this was outstripped by an 8.2 per cent increase in sales being agreed.

Prices edged up month-on-month by 0.3 per cent in East Anglia, by 0.2 per cent in the South West and by 0.1 per cent in the Midlagnds. 

They were flat month-on-month in the North East, the North West, Yorkshire and Humberside and Wales.

Peter Rollings, CEO of Marsh & Parsons, commented: 'We find at least 98 per cent of the asking price is generally achieved on prime London properties, and in excess of the asking price in very high-demand areas such as South and South West London. There is a general feel of optimism in the air with wider signs of economic recovery showing strong indicators of future growth prospects.

'Today’s figures show the London property market continuing to operate in its own microclimate, driving growth in UK house prices overall. The figures demonstrate the huge demand for London property with properties are selling at twice the speed of the rest of the UK. We expect this to increase even further as both overseas and domestic buyers strive in competition for the best properties.'