House prices in England and Wales have enjoyed their biggest monthly increase since May 2007, according to the latest figures.

Asking prices surged by 1.5% over the past month and residential property is being snapped up at its fastest rate since 2007, new data from Home.co.uk shows.

Residential property for sale in London is enjoying an even bigger boom, the figures show, with house prices in Greater London up 3.1% since January and seeing year-on-year growth of 16.7%.

Homes are now said to be on the market for three days less than in February 2013, while the supply of residential property for sale since then has fallen by 11% nationwide and by 28% in Greater London.

Prices are rising in every English region as well as in Scotland and Wales as low mortgage rates and the Help to Buy scheme tempt more buyers into a property search as optimism returns to the market.

Such demand has seen the annualised asking price rise reach 16.7% in London, according to the data.

However, the company believes the shortfall of residential property on the market is becoming a bigger problem across southern and eastern regions of England and Wales while continuing to be most severe of all in the English capital itself.

But it says there is more residential property for sale in Yorkshire, the North East and the North West, where a rising number of vendors will help to offset the upward pressure on prices.

Strutt & Parker’s latest London residential quarterly report shows that Prime Central London (PCL) areas have experienced their highest sales transaction values since 2006 with Kensington and Notting Hill seeing the largest increase, 21.8% compared to 2012 transaction values. Chelsea, South Kensington and Fulham also saw an increase in transactions values compared to 2012 (14.5%), which is likely due to selling the largest quantity of flats since the peak in 2006. The displaced demand from the latter half of 2012 and earlier in 2013 continued to accelerate activity and pricing, resulting in property values seeing a 13% year-on-year growth.

Strutt & Parker’s nationwide outlook for 2014 remains buoyant in both London and across the country. Stephanie McMahon, Head of Research, explains: “We expect UK house prices to grow by 7.0% across the UK in 2014, and 6.0% in PCL. During the latter part of 2014, we expect that price growth in 2014 will be more sensitive to prevailing political press and expectations due to the election - and this will be even more pronounced in 2015. However, the continuation of strong growth through the end of 2013 suggests the downward pressure might be less substantial in both of these years. On top of this, we expect sustainable growth to return through 2016 and 2017.”

Michael Fiddes, Head of Regional Residential Agency, adds: “We are starting to see money percolate out of the capital as the divergence in ‘value’ between the capital and the rest of the country has never been so great.”

For more information, contact your local Strutt & Parker office.