(RTTNews) - In a further sign that the UK property market is recovering after the worst recession, house prices rose for a third month in October, due to an increase in demand amid supply shortage.

The average asking price of a UK home rose 0.2% month-on-month to GBP 156,400 in October, according to property data manager Hometrack. On an annual basis, home prices were down 4.2% following the 5.6% contraction in the previous month. Home prices in London were up 0.4% month-on-month.

Other recent reports also showed continued increase in house prices. The Nationwide Building Society said its house price index rose for a sixth time in October on a monthly basis and recorded the first annual increase since March 2008. The Land Registry said house prices in England and Wales climbed 0.9% on a monthly basis in September. A survey conducted by the Royal Institute of Chartered Surveyors showed that the net balance of respondents expecting house price to rise increased in September to its highest level since May 2007.

The percentage of sellers achieving their full asking price climbed to 92.9% and the average time a property took to sell dropped to 8.4 weeks, Hometrack said.

“The last six months has seen a continued improvement in housing market sentiment on the back of rising demand and a lack of housing for sale,” said Richard Donnell, director of research at Hometrack. “Prices have firmed and the discount between sales and asking prices is back to the same level it was at the start of the credit crunch over two years ago.”

Donnell noted that recent Hometrack surveys give clear indications that there is a marked slowdown in the rate of growth in the volume of new buyers registering with agents. Higher prices are now weighing down demand, which boosted the market in recent months.

The number of new buyers registering with estate agents grew only 1.2%, down sharply from an average of 7.5% in spring and early summer. “Pent-up demand that has boosted the market in recent months is starting to fade in the face of firmer pricing and fewer clear bargains,” Donnell said.

The Bank of England, which is due to review its monetary policy on November 5, is expected to hold its key interest rate at a record low of 0.5%. The central bank is also expected to expand its asset purchase scheme from the current GBP 175 billion as the economy unexpectedly contracted in the third quarter.

According to a preliminary estimate from the Office for National Statistics, the British economy contracted 0.4% sequentially in the third quarter, after shrinking 0.6% in the second quarter. It was the sixth quarterly fall in gross domestic product. Thus, the economy suffered its longest streak of contraction on record.

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