Lack of supply boosts house prices

11 August 2009

A shortage of properties in the UK helped house prices rise during July, according to a report by the Royal Institution of Chartered Surveyors (RICS).

The report revealed the increase was partly driven by a rise in new buyer enquiries, while the number of properties on estate agents' books remained very low.  

It also painted a rosy picture about the future, with 8% more surveyors saying they expect prices to rise rather than fall during the next three months – the highest figure reported since April 2007.

Some 29% also predicted sales to increase rather than decrease during the next quarter. 

Jeremy Leaf, spokesman for RICS, says: "Although demand for property is continuing to rebound, it still remains low from a historical perspective. Crucially, it is the lack of supply that is helping to underpin prices at the present time.

"Significantly, the more positive news on prices - at least in some parts of the country - may prompt more properties to come on to the market. If mortgage availability remains insufficient to meet the increase in buyer demand, then it is possible that prices may slip back again especially if unemployment continues to rise and mortgage rates increase," he says.

From a regional perspective, the survey found that the property price gap between the north and south is now widening.

The net price balance is now positive in London, the South West, Scotland and the South East, while the weakest net price balances can be found in Wales, Yorkshire, Humberside and Northern Ireland.

Leaf adds: "The pattern emerging in the regions is very interesting, with more chartered surveyors in London, the South East and the South West reporting rising prices, while those in the North are clearly experiencing a very different market."

Last week, RICS said it predicted house prices would end the year higher than they started.

That said, it stressed that this does not indicate a quick return to the boom time, and RICS senior economist Brigid O'Leary warned that the outlook for next year is fairly uncertain and there is real risk that prices may slip back again.

The RICS housing market update follows recent surveys from the UK’s two largest mortgage lenders, Nationwide and Halifax, that both reported increases to house prices in July.

Another housing market survey, released by the National Association of Estate Agents last week, also suggests that the housing market has entered the summer months in a far stronger position than 12 months ago.

It said the market remains robust relative to this time last year, with an increase in agreed sales and the number of properties on the market.

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