New home prices up 2.2% in August

The average price of a new home rose by 2.2% in August 2009 and annual growth showed considerable improvement, with the rate of decline decreasing for the third month running to           -10.4%, according to Smart New Homes.

This means the average price for a new home now stands at £217,058.

David Bexon, managing director of Smart New Homes, said: “New home prices rallied in August, providing a further boost to the house building industry, following reports of an upsurge in homebuyer demand this summer.

“However, while there has been significant improvement since May this year, developers are likely to remain cautious on the prospects of market recovery. The chances of sustained house price growth still hinge on the availability and affordability of mortgages, where a great deal of progress is still required.

“While I am confident that a floor has now been reached for new home prices, I expect them to hold around their current value, and not increase at the rate seen recently in the re-sale market.

“The prospect of a severe supply shortage is likely to push up new home prices strongly in the long-run, but while this remains a real cause for concern, it has been allayed for the time being with many developers taking the opportunity to capitalise on the improved market by launching new schemes in September and October. New home prices may show more signs of firming with the release of this new stock, but developers’ primary concern is to keep buyers in the market, so they are unlikely to rise substantially.”