According to the Royal Institution of Chartered Surveyors (RICS) in its latest survey of the housing market, the number of properties on surveyors’ books is close to its lowest level for a year, and there are signs that buyers are getting discouraged.

A RICS housing spokesman said that with less choice available, people were compromising and buying houses that had been unsold for many months.

House price increases reached an end of year high in December, says the survey, despite difficulties caused by a marked shortage of new properties coming onto the market and the prospect of interest rate hikes.

In December, 41 percent more chartered surveyor estate agents reported a rise in house prices than a fall, up from 33 percent in November. They put the increase down to a lack of availability of property on the market.

Regions - London firm

The acceleration in house prices could be seen across all regions with the exception of the West Midlands. The most robust markets are still to be found in the North, North West and Yorkshire and Humberside, with the South East and East Midlands lagging behind. Prices in London, however, remain firm.

In December, the pool of property available to buyers was shrinking to low levels with fewer people putting their property on the market. Following an initial spurt in the run-up to the Iraq war, a decline in instructions has been seen throughout 2003. In December 17 percent more chartered surveyors reported a fall in new instructions than a rise, compared to 15 percent in the previous month.

Last quarter sales at 12-month high

However, for the three months to December 2003 the average number of property sales per surveyor was 32 on a seasonally adjusted basis, representing a 12-month high.

Surveyors remain optimistic about sales in the Spring. In December 30 percent more surveyors said they expect sales to increase rather than fall in the first quarter of 2004 – up from 23 percent in November.

RICS housing spokesman and chartered surveyor, Ian Perry, says:

“Conditions are ripe for a healthy start to the year. Many properties that sat on the market for months last year, have finally been sold as buyers had less choice available.”

“With a reported increase in the number of valuations taking place in the run up to Christmas, everyone seems confident more property will come on to the market now. However, for the short-term at least, intense competition is likely to remain.”

“The prospect of higher interest rates may deter some buyers from looking but this should be balanced by noticeable improvements in the economic climate.”

RICS believes the housing market bubble will not burst in 2004 and prices will continue to rise, although by only half as much as in 2003.

It forecasts a 6 percent increase in house prices in 2004, based on the government’s new monthly house price index. This figure is half the 11 percent rise expected for 2003.

Any slowdown is only likely to be the result of a gradual rise in interest rates or worsening employment prospects.