House prices rise due to low supply

British house prices rose at their highest rate for two years last month, a survey of the monthly housing market reveals.

Property consultant Hometrack found that house prices were up by 4.3 per cent this September compared to the same time a year ago. This marks the fastest rate of growth since September 2004.

But September's 0.4 per cent increase in average residential values is being fuelled by a lack of homes on the market, according to Hometrack's research.

Potential sellers are being put off marketing their houses due to the high price of new property, large numbers of fully mortgaged homeowners and the relatively high transaction costs.

The imbalance between supply and demand on the property market is most pronounced in London and the South East, where price inflation is far above levels across the rest of the country.

Hometrack's research does suggest that the mini boom in London prices may be petering out, as September was the third month in a row when the proportion of homes meeting asking prices fell.