House prices in the UK continue to edge higher, according to a report by the Royal Institution of Chartered Surveyors (RICS).
Thirty-four per cent of Chartered Surveyors reported more rises than falls in house prices, up from 20 per cent in September, and the highest since December 2006.
The results come after property consultancy Colliers CRE upgraded its forecast for the UK commercial property market, estimating 0.4 per cent growth for this year and next.
After a year of sluggish growth, the UK housing market has seen prices rise in recent months. The report is another sign of increased optimism in the property market, but experts warn against over-enthusiasm.
Jeremy Leaf, a spokesperson for RICS, predicts that prices will continue to rise. “Although the supply of property is beginning to pick up, it is still insufficient to keep pace with the increase in demand which points to further price gains in the near term.”
London currently leads the UK housing recovery, with 95 per cent of surveyors reporting price rises.
Vendors are also starting to return to the market, with 15 per cent of surveyors reporting an increase in new instructions in October, up from 5 per cent in September.
The past three months have also recorded rises in transactions, with 19 sales per surveyor.
The sales-to-stock ratio, a leading benchmark for future prices, has climbed for ten consecutive months.
More recently, the housing recovery has lifted consumer confidence after retail sales jumped last month.
But buyers and even experts remain cautious, despite significant gains in property prices. Mortgage lenders are still charging high interest rates on loans, though some have eased their deposit restrictions.
According to the report, buyer enquiries slowed for a fourth consecutive month, falling to 31 per cent from 35 per cent in September.
There are also fears of a second price correction. Savills, a leading estate agent, expects the property market rebound to end next year, with economic growth postponed until 2012, when financing and lending become more readily available.
“There has been a lot of pent-up demand in the housing market, but in only one particular sector - those with lots of equity and are not constrained by lack of financing,” said Lucian Cook, director at Savills.
Mr Cook expects demand to erode in 2011 causing prices to fall again.
James Moss, director at Curzon Investment Property, a London-based investment specialist, warned investors against depending too heavily on a leading index as an indicator of economic health.
He said the obsession with house price increases was one of the main causes of the mortgage meltdown, so investors need to be wary of price spikes.
“With house builders barely building, we’re in a false economy. This means prices will be artificially inflated through a lack of supply,” Mr Moss said.
However, the recovery in the UK housing market continues to gain momentum, with many first-time buyers depending on parental support to finance their purchases.
“Supply is increasing modestly but I would rather see fundamental and stable growth, marked by a gradual increase in prices, rather than a quick surge,” said Simon Rubinsohn, an economist at RICS.
