Property market at its most buoyant for three years

Property market up

Signs that Britain's housing market is finally recovering from the recession emerged today as estate agents said demand for property rose to a three-year high in April 2013. But the news immediately prompted some housing market commentators to warn that a recovering housing market is "disastrous" for first-time buyers.

Last month, 25% more estate agents reported that demand for property rose rather than fell, according to the latest market sentiment survey from the Royal Institution of Chartered Surveyors (RICS). It said this was due, in part, to the government's Help to Buy scheme.

As demand increased, so did supply, with estate agents reporting that new instructions to sell also went up during the month. Newly agreed sales improved too, with 19% more agents reporting sales rose rather than fell during April – up from 11% in March.

Peter Bolton King, global residential director at RICS, said: "With not enough housing to meet increased demand, prices are finally beginning to improve, and the survey recorded its first positive reading for house prices since June 2010.

"There are some understandable concerns that the measures will also lead to higher prices. In view of this, it is critical that developers are as good as their word and speed up the delivery of new stock."

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Outlook for first-time buyers

The Council of Mortgage Lenders also said today that first-time buyer activity remained strong in March, with the number of first-time buyers increasing by 20% month-on-month. First-time buyers took out a total of 19,100 loans worth £2.4 billion in March, up from the 15,900 loans advanced in February.

But housing commentators were quick to point out that, while government support may help first-time buyers in the short term, the outlook for them remains bleak.

Property expert Henry Pryor explained: "There seems little doubt that government initiatives such as Funding for Lending and Help to Buy have turned up the heat under the housing market with more than just the usual spring bounce we would expect at this time of year. But the extra gas being used to heat the market will be turned back down in three years, at which time the market will revert and prices are bound to come off the boil leaving those who buy now asking if they paid too much.

"Giving the 10 people struggling to buy the six houses for sale more money just means that the six successful buyers will pay more, it doesn't do anything practical to solve the biggest problem – namely the national housing crisis."

Mark Harris, chief executive of mortgage broker SPF Private Clients, added: "Rising house prices may be good news for homeowners but disastrous for would-be first-time buyers struggling to pull together a deposit. However, national average house price indices should be taken with a large pinch of salt as these conceal significant regional differences and much depends on where you live."

Prices in the south of England, particularly London, continue to rise, but in the north of the country prices are falling.

"If you are trying to buy in an area where prices continue to rise there is more pressure on timing - delay and you may be priced out further," Harris added. "But if prices are falling and you delay, you may find that you are in a stronger position."

He also said that a recovering housing market is good news for homeowners, particularly those second steppers who are trapped in a home that has become too small but they haven't got enough equity to move up the ladder. By moving up, they free homes for first-time buyers.

Meanwhile, the RICS survey also pointed out that demand for rented property continued to outstrip supply in April, with 18% more estate agents expecting rental prices to rise rather than fall in April. Respondents to the survey said they expected rents to rise by up to 2% over the next year.