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Property shortages keep driving up house prices, say experts

House prices have risen across all parts of the UK for the third consecutive month whilst stocks continue to fall.

Key points

RICS Residential Survey for October shows UK House prices are expected to rise by 4.5% per annum, over the next five years (a cumulative increase of around 25%)
  • Price balance points to higher prices across all parts of the UK for a third consecutive month
  • New sales instructions extend streak of uninterrupted decline stretching back to February
  • Sales growth pauses but expectations remain a little more positive

Prices continue to rise

House prices have risen across all parts of the UK for the third consecutive month, according to our latest UK Residential Market Survey. In October, 49% more chartered surveyors saw house prices rise across the UK, compared to 44% more in September.  
As prices rise in all areas of the UK, East Anglia has consistently seen the fastest rises over the last three months and 91% more chartered surveyors reported seeing a rise rather than fall in prices in October.
In contrast, 25% more chartered surveyors saw prices rise in London over the last three months, with only 5% more expecting a rise in prices in the capital over the next three months – this is the lowest reading across the UK over this time period. However the twelve month view for the capital is still relatively strong.
Contributing to the rise in prices across the country, demand from potential buyers grew across the UK in October with 12% more respondents seeing a rise in new buyer enquiries. Demand continues to considerably outpace supply and the number of new instructions has decreased for the ninth month in succession, with 10% more chartered surveyors reporting a fall. 
The supply of new stock to the UK market has been in decline since the middle of 2014, with the number of new instructions only increasing in one of these months.

Demand remains strong

Despite the lack of new stock to the market, sales activity is relatively healthy and following a small pick-up in agreed sales in September, activity was little changed this month across the UK. This chimes with HMRC transactions data, which continues to see the number of sales rising consistently over the year.
In the UK lettings market, demand is also continuing to outpace supply in the three months to October*. This has been the trend nationally for some time, with the growth in demand outstripping that of supply since 2009. Unsurprisingly, rental expectations remain strong and respondents continue to expect rents to rise over the year ahead. Rental growth is anticipated to accelerate to an average of just under 5% per year over the coming five years.

The view from RICS

It is hard to get away from the issue of supply when it comes to the current state of the housing market. The legacy of the drop in new build following the onset of the global financial crisis is now really hitting home, with both the sales and letting markets continuing to show demand outstripping supply on a month by month basis.

If the five year projections from members regarding the outlook for both prices and rents is anything to go by, property is set to become even more unaffordable going forward making the Government’s focus of boosting the delivery of new homes absolutely critical.[
Simon Rubinsohn, RICS Chief Economist]