A property shortage is driving up house prices despite the recent rises in interest rates, a report warns today.

The average asking price for a house in England and Wales has jumped to a new high of £222,859, property website Rightmove has claimed.

It is a lack of homes for sale that is wiping out the impact of rising interest rates, according to the firm who says the stock of homes is now at a 3-year low.

Flats and terraces show the biggest rise during the last quarter as demand from new households outstrips stock replacement.

Miles Shipside, commercial director of Rightmove commented: “Stock levels per estate agent at the start of the year have not been this low for three years, and are 18% lower than at this time last year. Where there are shortages of property, prices will keep increasing and properties will keep selling, in spite of the latest interest rate rise”.

“Despite the unexpected January rate rise and poor inflation figures, we stand by our 2007 forecast of a rise in property prices of 6%, most of which we expect to see in the first half of the year.”

“Despite the three interest rate rises in the last six months, there is evidence that newly formed households are a major contributor to rising prices. The average asking prices of flats and terraces, the type of properties sought by first time buyers, each rose by over £4,000 during the last 3 months, compared to detached properties falling by nearly £5,000.”

“New households often have an urgent requirement for a home, and whilst three interest rate rises will cause financial pain, many are still finding the means to get on the property ladder.”

“As with previous rate rises, the Bank of England cannot address the long term demand and supply imbalance, and indeed monetary policy is a particularly blunt tool in this respect. Property prices will continue their upward trend, and fuel long term inflationary pressures, until we see the fruits of positive government action to improve the supply, and consequently the affordability, of housing.”