South East: Lack of housing supply continues to drive prices up, says RICS

House prices continue to be squeezed higher by contracting supply in the South East, according to the latest RICS UK Residential Market Survey.

While 45% more chartered surveyors saw prices rise in July in the South East, supply to the market continued the decline with 14% more surveyors reporting a drop in new instructions. This trend was mirrored across the UK and consequently, all areas are projected to see sizeable house price gains over the next 12 months, with confidence most elevated in East Anglia and Northern Ireland.

Near term expectations for prices in the South East also continue to reflect the lack of supply with 44% of members expecting prices to continue to rise over the next three months.  In the region, new buyer enquiries remain low which is a contrast to the rest of the UK where rising prices have not dampened interest. Going forward, there is optimism regarding the prospects for activity in the region with 39% more respondents expecting sales to gain momentum over the next three months.

Simon Rubinsohn, RICS chief economist, 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 stronger 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.

"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.’’