Rise in supply of properties fails to stop hike in house prices

A survey by RICS shows that the modest rise in the number of properties up for sale has little effect to stop the increase in house prices.

Chartered Surveyors are reporting that the number of new instructions have been rising for the sixth consecutive month instead of falling. But the demand for new properties also continue to rise outstripping supply with over 28 percent of surveyors saying the enquiries from potential buyers have been on the upswing.

While the number of enquiries fell compared with the previous months, RICS said there is still an indication of a strong demand from potential buyers.

It said that the imbalance between supply and demand is causing prices to go up as the majority of surveyors are reporting a notable increase in house prices. A net balance of 35 percent of Chartered Surveyors agreed that prices were rising, up from 34 percent in October.

RICS spokesperson Ian Perry said, “For the fourth month in a row, the survey points towards prices rising, even though the general state of the economy would suggest that the housing market should not be faring as well as it is. Despite modest increases in the number of properties coming on to the market, it is clear that this is not significant enough to keep pace with the levels of demand. Buyer enquiries are continuing to grow and with the pace of job losses now easing, the risk is that the new year could see a further wave of interest in the market.”

The London and South east areas are leading the number of strong enquiries from eager buyers against subdued levels of instructions and as such, prices are rising most rapidly.

Transaction levels remained broadly constant with sales per surveying firm hovering around 19 over the past three months. But with the inventory of property on the market falling, the closely watched sales to stock ratio – a measure of market slack and a lead indicator of future prices- has climbed a little further. It has now risen for the past 12 months and stands at 31 percent.

Although the latest survey provides further evidence that key indicators continue to improve, the pace of these improvements does appear to be slowing. In particular, the number of respondents feeling positive about the outlook for prices dropped slightly. 28 percent of Chartered Surveyors believe that prices will continue to rise rather than fall over the next three months; this is slightly down form 31 percent the previous month.