House prices increased by 0.4% during June, according to Hometrack.
This increase matches May 2013 as the highest rise in prices in a single month since June 2007.
Hometrack said an on-going shortage of housing for sale, continued growth in demand and improving market sentiment are combining to push prices higher.
Richard Donnell, director of research at Hometrack, said there is a clear divide in market performance between London and southern England and the rest of the country.
He said: “While underlying market conditions have improved across all regions, house prices were unchanged in four out of 10 regions in June.
“The upward momentum seen in house prices has been driven by a widening gap between supply and demand. This gap stabilised in June with slower growth in both new supply (+1.6%) and demand (+1.6%) compared to previous months. A seasonal slowdown in demand is to be expected as we approach the summer months.
“Despite this, an on-going shortage of housing for sale remains a key feature of the market and an important driver of price increases. Two factors are behind the shortage in supply. First, is an increase in the number of first time buyers who increase demand but add nothing to available supply. Secondly, existing occupiers are looking to identify property they want to buy before putting their homes on the market which boosts demand ahead of any growth in supply.
The net result has been an increase in the proportion of the country registering price rises. In June the survey recorded price increases across 31% of the country – the highest coverage of price growth since May 2007. Price falls were recorded across just 3.1% of postcodes.”
Hometrack reported that improved market activity and price rises are spreading beyond London. Prices grew in six out of ten regions in June with London posting a well above average increase of 0.9%, the same level seen in May. East Anglia registered a 0.4% increase while prices in the South East grew 0.3%. The four areas where prices were unchanged were the North West, North East, Yorkshire & Humberside and Wales.
Donnell said: “This divergence in performance is shown in the average time to sell property which is 4.1 weeks in London (the lowest since September 2007), 6.5 weeks in the South East and, as an average, over 10 weeks in the midlands and northern regions.
“While demand looks set to moderate in the coming months, the lead indicators in the survey suggest continued price increases. The proportion of the asking price being achieved is an important indicator for the underlying strength of house prices. The higher this indicator grows above 93% the greater the upward pressure on prices. In London the percentage is over 96%, this is the highest for six years (June 2007).”