House prices continue to rise fuelled by lack of supply
(16/11/2009)

According to the latest RICS UK housing market survey, house prices continue to rise despite an increase in the number of new instructions received by agents. The seasonally adjusted net balance of surveyors reporting rising rather than falling prices over the last three months jumped sharply higher to 34%, compared to 21% in September.

The net balance of Chartered Surveyors reporting rises rather than falls in house prices reached a positive reading of 34 in October, up from 20 percent in September – this is the highest result since December 2006. London is leading the upturn in prices with the net balance of surveyors reporting rises rather than falls for London climbing to 95 percent - the highest figure since December 1996.

However, the survey also contains some evidence that vendors are beginning to return to the market. A net balance of 15 percent of surveyors reported that new instructions had increased in October, compared to a reading of five percent in September. Significantly, all regions reported a rise in instructions for the first time since the onset of the credit crunch with the North, the South West and London leading the way.

Meanwhile, transaction levels continued to rise with sales per surveyor edging up to 19 over the past three months. As a result, the closely watched sales to stock ratio – a measure of market slack and a lead indicator of future prices–climbed a little further. It has now risen for ten consecutive months and stands at 30.

The pace of improvement in buyer interest slowed for the fourth consecutive month. The net balance of surveyors reporting an increase rather than a decrease in new buyer enquiries slipped from 35 percent in September to 31 percent. However, only East Anglia is seeing a fall in buyer enquiries while buyer interest is strongest in London.

Commenting, RICS spokesperson Jeremy Leaf said: “Although the supply of property is beginning to pick-up, it is still insufficient to keep pace with the increase in demand which points to further prices gains in the near term. Cheap money remains a critical prop for the market and this is being reflected in the continuing appetite for finance from first-time buyers despite the large deposits still being demanded by lenders.”

James Moss, director at Curzon Investment Property, a London-based investment specialist, said: “With house builders are barely building, we’re in a false economy. This means prices will be artificially inflated through a lack of supply. However, investors should always take any house price index with a large pinch of salt. A national average can never accurately represent the subtleties of any local market. Plus, it was this very obsession with house price increases - and people re-mortgaging their homes when they thought the values had shot up - that got us into this mess in the first place.”