House prices in the UK will see an increase of 2% over the course of next year while the cost of renting a home should rise by around 4%, according to the 2012 forecast from the Royal Institution of Chartered Surveyors published today (Friday 14 December).

RICS says that although challenging times are still ahead for the nation’s economy, 2013 may see some slight improvements and this will be reflected in the housing market.

In addition to rising prices, the number of transactions will also see a further increase, moving up just over 3% to 960,000 from 930,000 in 2012. But this needs to be put into context. It is indeed an improvement but before the global economic downturn sales were much higher. For example in 2006 they were 1.67 million.

What happens in the market will vary according to location. In London, RICS expects the prime central market to be broadly stable following the tax changes announced earlier in the year but much of the rest of the capital will continue to see above average increases. Elsewhere in the country it believes that the South East and the North West should also see modest rises. The rest of the country will either see prices dip slightly or remain flat.

The recent trend in repossessions looks set to continue. However, with the number of possession claims and mortgages currently more than three months in arrears falling, the number of repossessions should dip below 35,000 for the first time since 2007.

When it comes to new homes RICS says that housing starts should edge up towards 115,000 in England but this is still short of the number that many experts believe is needed to solve the country’s chronic shortage of homes, especially in the more affordable sector to encourage first time buyers.

‘The average house price in the UK looks set to rise by a further 2% next year, despite the uncertain outlook for the economy. More positively, the amount of sales going through should also see an increase across the country, climbing to its best level since 2007, as the Funding for Lending scheme helps boost the availability of mortgage finance,’ said Simon Rubinsohn, RICS chief economist.

‘But these tentative signs of recovery in the sales market should not blind us to the very real problems that still exist. Even with the Funding for Lending scheme and come other government policies beginning to be felt in the mortgage market, many first time buyers will continue to find it difficult to secure a sufficiently large loan to take an initial step on the housing market,’ he explained.

‘Meanwhile, the alternative of renting is becoming more and more costly with a further increase in rents likely in 2013. Critically, the government needs to ensure that the conditions are in place that will enable the stock of new housing, whether for purchase or rent, to rise more rapidly,’ added Rubinsohn.

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