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Optimism rising in UK residential property market

Some 8% more chartered surveyors expect prices to rise rather than fall over the next three months, the highest reading since April 2007, the Royal Institute of Chartered Surveyors July index shows.

It says that the improved optimism for prices can at least partly be attributed to the fact that increased interest from new buyers has not been matched by supply coming onto the market. New buyer enquiries remained high in July with a net balance of 63% reporting a rise rather than a fall. Although this is marginally lower than the previous month, it is still indicative of a growing level of interest in the market, RICS points out.

At the same time the levels of stock on estate agents books remained very low. In July more chartered surveyors reported an increase than a decrease in the number of new instructions for the first time since May 2007.

However, the positive net balance of just 2% suggests that vendors are still a little reluctant to put properties on the market.

But housing market activity, in terms of actual transactions, also continued to rise during July. The monthly increase in the agreed sales net balance pushed that measure to its best level in a decade.

Also on average, surveyors sold 15 properties over the past three months compared with the previous reading of 13. As a result the sales-to-stock ratio, a measure of market tightness, increased slightly to 25, supporting the argument that the imbalance in stock levels is still providing support for prices.

The report also shows a north/south divide developing in the English property market. The sales-to-stock ratio is highest in London and the South East and lowest in the North. Chartered Surveyors in London, the south east and the south west are reporting price rises while those in the north are experiencing a very different marketplace.

'Although demand for property is continuing to rebound, it still remains low from a historical perspective. Crucially it is the lack of supply that is helping to underpin prices at the present time,' explained RICS spokesman Jeremy Leaf.

'Significantly, the more positive news on prices, at least in some parts of the country, may prompt more properties to come on to the market. If mortgage availability remains insufficient to meet the increase in buyer demand, then it is possible that prices may slip back again especially if unemployment continues to rise and mortgage rates increase,' he added.