Growing demand and short supply is pushing up house prices, says RICS

House prices in the UK continue to be squeezed higher by growing demand and contracting supply, according to the latest residential market survey from the Royal Institution of Chartered Surveyors (RICS).

The report shows that while 44% more chartered surveyors saw prices rise in July, supply to the market continued the decline with 22% more surveyors reporting a drop in new instructions.

Additionally, the shortage of housing inventory worsened further during July, with the average number of listings for sale per surveyor slipping to a record low. Consequently, all areas of the UK are projected to see sizeable house price gains over the next 12 months, with confidence most elevated in East Anglia and Northern Ireland.

The report also says that near term expectations for prices also continue to reflect the imbalance between demand and supply with 41% of members expecting prices to continue to rise over the next three months.

However, rising prices have not dampened interest as new buyer enquiries rose for the fourth month in succession, with 25% of respondents reporting a rise in demand. Despite this steady and sustained improvement in demand, newly agreed sales were more or less unchanged at the national level in July.

Going forward, there is a little more optimism regarding the prospects for activity with 37% more respondents expecting sales to gain momentum over the next three months and 40% more taking the same view on a one year perspective.

‘This government has put home ownership at the very heart of its agenda, with Starter Homes and extending Right to Buy the strongest evidence of that ambition. However, this continues to be demand driven and fails to address the real issue of supply,’ said Jeremy Blackburn, RICS Head of Policy

‘A coherent and coordinated house building strategy is required across all tenures. This should include measures that will kick start the supply side, such as mapping brownfield, addressing planning restrictions and creating a housing observatory to assess the underlying economic and social drivers of housing and provide the impetus for solutions,’ he explained.

‘The changes brought in through Fixing the Foundations, the Chancellor’s productivity plan, were welcome and refreshingly on the supply side, such as zonal planning, dispute resolution for S106 and local plan enforcement. But these alone are not a strategy for increasing housing supply across all tenures,’ he added.

Blackburn also pointed out that in the lettings market, tenant demand continued to rise while landlord instructions, despite increasing slightly, failed to keep pace once more. As a result 34 % of respondents expect rents to increase right across the UK with members in the West Midlands expecting 4% growth over the next year and in the South East 3.3% growth.

The housing market is facing some very real challenges, according to Simon Rubinsohn, RICS chief economist, but more worrying still is the suspicion that the imbalance between supply and demand will lead to even strong price gains over the next 12 months.

‘This is also visible in the firmer pattern in the buyer enquiries series which has now risen for four months in succession reflecting in part, a further modest easing in credit conditions,’ he said.

This ‘trend could be brought to a halt when base rates do eventually begin to rise but the dovish tone to the latest Bank of England Inflation Report suggests the first move will come a little later than previously thought likely and that subsequent increases will be very gradual indeed,’ he added.

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Source: Property News Spain