New home prices increased significantly last month, according to the latest report from newly-built homes website, SmartNewHomes.com.

The average price of a new home in the UK in March 2006 was £264,709, an increase of 3.1% from the same time last year and up 1.9% from the previous month. This is the most significant upturn in prices since November 2004 and signifies a full recovery from the downturn of 2005.

SmartNewHomes.com also looks at the price homebuyers are willing to pay for their new home. This ‘demand’ figure has decreased slightly from last month but remains 3.8% higher than at the same time last year, demonstrating that consumer confidence in the market is strong and providing further evidence that the housing market will show sustainable growth over the remainder of the year. The spring is the traditional time when house prices and activity in the market booms and it looks likely that 2006 will see a return to that trend.

London leads the way

New homes in Greater London have seen the strongest increase over the last year, rising by 11% since March 2005. London’s housing market tends to lead the trend for the remainder of the country so strong growth in this area provides further indications that prices will increase across the wider market, as was also seen in Yorkshire and Humberside last month.

The South West and Wales were the only areas to see prices decrease over the last year.

Scottish revival

The new homes market in Scotland continued to boom as prices in the country rose a further 1.1% over the last month to take them 6.2% higher than at the same time last year. Scotland’s mini boom has been boosted further by an influx of buyers to the area that has made Scotland the most popular region in the UK for almost a year.

Detached homes at new low

Less than a quarter of the new homes for sale in the UK last month were detached – a new low for the reducing property type whilst apartments surged to further dominance, making up 58.7% of the market. The average price of apartments has been increasingly steadily over the last six months, along with that of semi-detached properties. Detached homes remain the most expensive property type (excluding penthouses) but have seen average prices dip slightly since the same time last year.

David Bexon, managing director of SmartNewHomes.com, commented: "The upturn in the market over the last few months has taken average prices back to level they were at prior to the slump of 2005. After almost a year of negative annual price inflation, the market is back on track and 2006 is likely to be a year of sustainable growth."

"Consumer confidence has returned as buyers realise that the market will not succumb to a crash, interest rates remain low, and demand still outstrips supply. The next couple of months could see a further boost in prices as the market enjoys a traditional spring boom."