Lack of supply boosts UK residential property prices but they could still fall

UK residential property prices are expected to rise further over the next three months as confidence in the real estate market increases, according to the latest monthly survey.

But a north/south divide is opening up with prices rising in London, the south east and the south west but in the north of the country there is a very different picture, the July index from the Royal Institute of Chartered Surveyors shows.

Some 8% more chartered surveyors expect residential property prices to rise rather than fall over the next three months, the highest reading since April 2007. This is partly due to the fact that increased interest from new buyers has not been matched by supply coming onto the market.

New buyer enquiries remained high in July with a net balance of 63% reporting a rise rather than a fall. Although this is marginally lower than the previous month, it is still indicative of a growing level of interest in the market, RICS points out. At the same time the levels of stock on estate agents books remained very low. In July more chartered surveyors reported an increase than a decrease in the number of new instructions for the first time since May 2007.

Sales also continued to rise during July but there is still a reluctance by vendors to put their properties on the market. ‘Although demand for property is continuing to rebound, it still remains low from a historical perspective. Crucially it is the lack of supply that is helping to underpin prices at the present time,’ explained RICS spokesman Jeremy Leaf.

‘Significantly, the more positive news on prices, at least in some parts of the country, may prompt more properties to come on to the market. If mortgage availability remains insufficient to meet the increase in buyer demand, then it is possible that prices may slip back again especially if unemployment continues to rise and mortgage rates increase,’ he added.

The residential property north/south divide is also shown in a report from house hunting website which shows that there are houses in some part of the country for sale for under £30,000. It mentions a two bedroom semi-detached property in Nottinghamshire at £25,000 and a three bedroom terraced house in South Humberside for £29,950.

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