House prices set to rise by 8%

House prices will rise by another 8% next year due to the shortage of homes coming onto the market, surveyors have forecast.

The Royal Institution of Chartered Surveyors (RICS) said all parts of the country would see prices rise, with London set for another 11% jump on top of already sizeable gains over the last year.

Based on its recent feedback, RICS said the demand-supply imbalance was the key challenge facing the residential market.

It believes the number of transactions will improve to 1.2 million next year from the estimated 1.05 million this year, although this is still a long way short of the 1.67 million sales seen in 2006.

And it warned a rise in construction starts to 155,000 from 125,000 this year will be insufficient to address the more rapid growth in population.

RICS director Peter Bolton King said: ” We expect all areas of the country to see prices increase, with London, predictably, recording the biggest rises.

“The improving economic picture aside, this is largely down to the fact that buyer numbers considerably outweigh the number of homes on the market.

“While the number of new homes being built is now on the rise, it still won’t be anywhere near enough to meet demand and we expect the problem of insufficient housing stock to be the main driver behind price increases over the next 12 months.”

In his autumn statement, Chancellor George Osborne announced £1 billion in loans to unblock large housing developments, including in Manchester and Leeds and raising a borrowing limit for councils to fund new homes.

RICS said house prices rose 5% in 2013, aided by a string of Government schemes such as Help to Buy and Funding for Lending, which widened mortgage availability and fuelled demand from buyers.

A new phase of the Government’s flagship Help to Buy scheme was launched in October to give more people with low deposits a helping hand on to or up the housing ladder.

But fears have been raised that the upward pressure on house prices could lead to a ”bubble”, with borrowers over-stretching themselves after a long period of ultra-low interest rates.

According to RICS, regional prices will rise by the following percentages in 2014:

East of England 10;

East Midlands 10;

London 11:

North East 5;

Northern Ireland 4;

North West 7;

Scotland 7;

South East 7;

South West 7;

Wales 7;

West Midlands 7;

Yorkshire and Humberside 7