House prices put on surprise rally, what's going on?

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Homeowners have become so used to bad news about house prices that every time a set of new figures come out, we don the tin hat and wait for the worst. So it is with huge surprise that we hear that house prices have put on something of a storming rally since the beginning of the year.

So what's going on, and is the good news set to stay?

Price rises
FindaProperty looked into the performance of house prices in 2011, and came to a shocking conclusion. They found that the average cost of a home in the UK has risen by around £100 a week. Of course the picture in London is more dramatic, where house prices are still above their 2008 levels, and the average home costs an astonishing £427,889.

However, this report isn't just a skewed London finding, it says that prices almost everywhere around the country have increased by at least 1.7% or £3,667 since the beginning of January.

What's going on?
Apparently this has a great deal to do with the fact that people are putting off selling. They have seen their property price fall and are staying put in the hope that a recovery puts them back on a former footing. It means that very few properties are hitting the market, so people are having to pay a premium to find a new home.

And this isn't the end of the good news, the report found that properties are selling nine days faster than they were at the beginning of the year. It's another sign that demand is starting to out-strip supply, and buyers are keen to get hold of a property they like.

Samantha Baden, analyst at FindaProperty, said: "The rise in house prices shows confidence in the property market remains steady as a result of homeowners realising the old adage is true – in times of trouble invest in bricks and mortar. Despite economic tough times, property has proven a far more solid investment than might have been thought at the start of the year. This growth is encouraging amid a still struggling economy."

What next?
The big question is what will happen next. There are those who see a long term rosy picture. The Centre for Economics and Business Research predicts that prices will rise and that by 2015 they will be at an all-time high of over £200,000.

However, this depends on where the current economic crisis takes us. For a flourishing housing market, we need people who are in safe employment who feel comfortable about the economic outlook. We need a lot of confident buyers and a few equally confident sellers. That's a lot of variables.

There are risks to confidence, there's a chance that spending cuts will further damage the picture of unemployment, and there's a chance that the current crisis will push us back into recession... none of which is likely to boost the value of your property.

But what do you think? Where will prices go next? Let us know in the comments.

House price rises
West Midlands 2.9%
North East 2.6%
London 2.3%
South West 1.9%
Yorks and Humber 1.5%
East Midlands 1.4%
East 1.2%
South East 0.9%
Scotland 4.9%
Wales (fall) 0.4%

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