UK house prices are expected to continue rising due to a severe shortage of properties for sale, according to the Royal Institution of Chartered Surveyors.
Its latest Residential Market Survey reveals the “drought in new listings” was now a significant factor holding back the market nationwide.
The lack of available homes is driving up competition between prospective buyers, with respondents predicting prices will continue rising as a result.
Transaction levels may flatline
According to Simon Rubinsohn, RICS chief economist, prices are expected to continue rising over the coming year as a result of the supply issues.
“Unless this trend is reversed soon, transaction levels may flatline in 2022 with limited choice proving more significant than any shift in the interest-rate environment for new buyers,” he said.
The findings echo the latest Halifax House Price Index, which revealed UK property prices were rising at their fastest rate for 15 years due to a shortage of properties for sale.
Market running hot
According to Andrew Wishart, property economist at Capital Economics, the RICS findings suggest the market could continue to “run hot” for some time.
“The big picture is that supply remains close to a record low, and the new instructions balance remained firmly in negative territory,” he said.
He also pointed out its seasonally adjusted measure of Google searches for Zoopla and Rightmove was 50% above pre-pandemic levels in November, chiming with the rise in the new buyer enquiries.
Mortgage rates to cool demand
However, Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, doesn’t believe the imbalance between demand and supply can be maintained.
“Mortgage rates jumped in November in response to the recent increase in risk-free rates, and they have further to rise,” she warned.
She pointed out the five-year fixed-rate mortgage rate, with a 75% LTV ratio, rose to 1.52% in November, from 1.30% in October, and predicted it will rise to 1.7% early next year.
“We expect prices to flatline in the first half of 2022, before rising slowly in the second half of the year,” she added.
Lettings market
Separately, the RICS pointed out that tenant demand result in another solid monthly increase during November, while landlord instructions fell.
“Given this mismatch between rising demand and dwindling supply, rents are anticipated to increase firmly over the near term,” it stated.
Over the next twelve months, survey respondents project a near 4% growth in rents at the national level, with rental growth expected to average roughly 5% per annum over the next five years.
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