House prices have nowhere to go but up as the imbalance as demand and supply in the property market are growing further apart, according to the RICS.
Over two-fifths (41 per cent) of chartered surveyors expect prices to grow in the next three months, the latest UK Residential Market Survey of the Royal Institution of Chartered Surveyors (RICS) shows.
In July, 44 per cent of surveyors reported price rises, while supply of fresh housing stock dropped further with 22 per cent of surveyors saying they had received fewer instructions last month.
Despite the shortage in supply, demand continues to grow. A quarter (25 per cent) of surveyors reported more enquiries from new buyers in July.
The way to close the widening gap between demand and supply is “a coherent and coordinated house building strategy across all tenures”, according to Jeremy Blackburn, RICS head of policy.
He says:
“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.
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.
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.
In the lettings market, tenant demand continued to rise while landlord instructions, despite increasing slightly, failed to keep pace once more. Consequently, 34 % of respondents expect rents to increase right across the UK with members in the West Midlands (4%) and the South East (3.3%), projecting the sharpest growth over the next twelve months.”
Commenting on the survey findings, RICS chief economist Simon Rubinsohn said:
“A renewed acceleration in house price inflation allied to a fairly flat trend in sales activity highlights the very real challenges being presented by the housing market.
More worrying still is the suspicion that the imbalance between supply and demand will lead to even strong price gains over the next twelve 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.
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.”
