Both the residential and lettings markets are suffering from a supply shortage and the latter will worsen as the new mortgage interest relief changes start to bite from April, RICS has warned.

The RICS Residential Market Survey found there were 5% more surveyors registering new buyers in January, the softest reading since August 2016.

Meanwhile, 28% more respondents felt that landlords were likely to decrease rather than increase the size of their portfolio over the next 12 months, while over the next three years, 26% more surveyors expect landlords to scale back their portfolios.

In the residential market, 11% more chartered surveyors saw a fall in new instructions in January rather than a rise, leaving average stock levels on agent’s books close to historic lows.

Surveyor activity overall was flat for the second month in succession with 1% more chartered surveyors seeing a fall in sales over the month.

Sales are however predicted to improve in the near term with 15% more respondents expecting a rise rather than fall over the next three months nationally and 37% predicting that sales will increase over the next 12 months, which is the highest ranking for a year.

Jeremy Blackburn, head of policy for RICS, said: “Ministers must be credited with changing the course of the ship of state on housing.

“They’ve listened to us on expanding supply not just pumping demand, and on giving institutionalised PRS much greater priority alongside owner occupation.

“Our survey demonstrates how vital greater supply is in this sector; we really need to turbo boost Build to Rent. The consultation on how to do this must be used as a defining moment.

“At the same time, we need to stop punitive measures against our bedrock small landlords.

“The detail on the ban on letting agent fees is yet to come, and along with any overt forcing of longer tenancies, could dampen investment in buy-to-let overall. The Government must be careful about signalling both stop and go at the same time.”