UK house prices are continuing to increase as a result of the lack of new properties being listed for sale as new buyer enquiries rise, but there are emerging signs that growth could start to slow.
Property prices in Britain hit a new eight-month high in February as the housing market showed little sign of losing momentum amid a growing living cost squeeze.
The Royal Institution of Chartered Surveyors (RICS) said a net balance of +79% of its members reported a rise in house prices in February, up from +74% in January and its highest since June.
House prices continue to rise significantly, despite the phasing out of temporary stamp duty break on property purchases in the second half of 2021.
But with household budgets being squeezed by high inflation and imminent tax rises, RICS had doubts about whether existing house price growth could continue at the existing rate.
“Huge clouds of uncertainty hang over the economic prospects as energy prices continue to surge and the Bank of England grapples with how to manage monetary policy in this challenging environment,” said Simon Rubinsohn, RICS chief economist.
“Despite all of this, there is little evidence yet that the mood music regarding the expectations for house prices or rents is shifting.”
Expectations for house price growth in the coming 12 months were strong cross all parts of the UK, the survey showed.
Rents were expected to increase by an average 4.5% over the next 12 months. The proportion of surveyors expecting rents to rise was the highest since December 2012, RICS said.
The supply-demand imbalance is likely to keep prices high, but there are signs that growth will start to slow.
Tom Bill, head of UK residential research at Knight Frank, said: “We are presumably witnessing the final few months of double-digit house price growth before supply picks up and demand begins to fray around the edges. UK house prices have been skewed by a lack of supply in recent months but the shelves are gradually re-stocking, a process accelerated by the arrival of spring.
“Meanwhile, higher inflation and rising mortgage rates will begin to put the brakes on sky-high demand. It won’t happen overnight but I would expect the return of single-digit house price growth later this year. While the Bank of England may adopt a more risk-averse approach to raising the base rate given the geopolitical uncertainty, mortgage rates are still playing catch-up and lenders are likely to keep withdrawing their best products.”
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