House prices helped by demand rebound and historic supply low, RICS says

(ShareCast News) - Surveyors reported an unexpected increase in house prices in the last three months as demand rose but the supply of new homes for sale dropped off and numbers for sale in London dropped to a historic low.The Royal Institution for Chartered Surveyors (RICS) revealed the headline balance of firms reporting that house prices have risen over the last three months increased to +17% in September from +13% in August and beating the City consensus, which had predicted a slide to +12%.It was the first time demand had risen in seven months, RICS said,The number of new instructions being received by estate agents fell further, with the new sale instructions balance weakening to -11 from -4.As a result, the average level of stock on estate agents books remains close to historic lows at just over 45 properties, or 27 in London, with the number of completed sales per surveyor falling to its lowest level since April 2013.RICS said it expects the constricted housing supply alongside the increase in demand to "push up prices somewhat in the near term and by rather more in longer term".While a balance of 14% of surveyors expecting house prices to rise nationally over the next three months, central London prices are expected to fall, albeit only modestly, as Brexit uncertainty and Stamp Duty weigh, particularly on the top end of the market.Analyst Robin Hardy at Shore Capital said the buyers' market that was developing would tend to lead to a more inflationary environment, though the low amount of stock available could counter this."That position is more likely to be deflationary because of how estate agents see the world - they are driven by volume of transactions rather than price and would be happy to drive prices lower in an attempt to make the market more active."However, in today's market that is by no means guaranteed to create more activity because it is less likely to solve unblock what we increasingly believe to be the log jam in the market. We still see the main problem being those homeowners towards the bottom end of the 'ladder' (probably those who were first time buyers 5-7 years ago) and wanting to trade up but lack the income, equity and additional resource to be able to secure a mortgage for a larger house," the analyst said.Capital Economics said that with economic growth set to moderate and house prices already high, "we don't expect house price growth to take off again anytime soon".Nevertheless, the RICS report sent housebuilding shares higher on Thursday, led by Persimmon up 3.5% to 1,750p, Taylor Wimpey up 3% to 148.02p, Barratt Developments up 1.9% to 482.9p, British Land 1.6% to 591p and Capital & Counties Properties up 3.7% to 277.2p.