House prices could continue to rise at an accelerating pace as current market conditions continue to see housing demand outstrip supply, Simon Rubinsohn has said.
The chief economist of the Royal Institute of Chartered Surveyors said prices were set to climb by 6 per cent over 2015, compared to the 3 per cent the body predicted at the beginning of the year.
“House price inflation has now quickened in each of the past seven months and looks like it will continue into next year, however uncomfortable that may be for those looking to enter the market; so many of our members are telling us that they are struggling to replace the stock they have sold,” he said.
The house price rise was attributed to the continued imbalance between falling new instructions to sell and rising buyer demand, according to the latest Rics UK Residential Market Survey.
According to the survey, 37 per cent more members were expecting prices to continue to rise over the next three months and 76 per cent over the year.
The Rics price indicator reached a 15-month high in August, with 53 per cent more members reporting price rises, and firm growth being seen in all areas of the UK.
The strongest price growth is forecast for Northern Ireland, where prices are anticipated to rise by 11 per cent this year, in contrast to the North East of England, which will see a 3 per cent increase.
However, new buyer enquiries increased for a fifth month, according to the survey, with 22 per cent of respondents reporting a rise in demand, led by substantial improvements in the West Midlands, Wales and the North West of England.
Despite demand picking up in recent months, the trade body lowered its forecast for transactions for 2015 from 1.25m to 1.2m.
However, Kevin Doran, chief investment officer at Brown Shipley, suggested the Bank of England’s monetary policy committee should have already acted on interest rates, as house prices were rising out of control.
In both 2014 and 2015, Ian McCafferty, a member of the MPC, voted to raise rates by 0.25 per cent – the only hawk among seven other members.
Mr Doran said: “The failure to act has resulted in many unintended consequences – one of the most profound of which has been the creation of asset price bubbles, both clearly visible in UK government bonds and UK property prices.”
Mike Richards, director of London-based Mortgage Concepts Associates, said: “I have clients in areas around London and the home counties who are saying house prices are going down, and are even reducing.
“A rise would mean mortgages would be more difficult to obtain and, because wages are not going up, people will have to put more deposit down and will struggle. With new instructions, getting property on the market is more difficult because people are not moving; they are wary about the market.”
76% of respondents believed prices would rise over next 12 months