The housing market remains strong, but surveyors are less optimistic due to interest rate rises, says the latest report from RICS, the Royal Institution of Chartered Surveyors.

House prices have continued to rise, say the surveyors, but the pace of increase has slowed slightly for the first time in six months as buyers assess the market in the wake of the upward trend in interest rates.

Fever-pitch speculation over the size of interest rate hikes this year has put a dampener on buyers’ moods, but the number of houses for sale remains weak, putting upward pressure on prices.

The report, which for the first time includes data from Scotland as well as England and Wales, says that for the three months to May, 44 percent more surveyors reported a rise in prices than a fall, compared to 46 percent in April.

Although the difference in the national recorded figure is small, the regional picture varies, with the North, Wales and Scotland recording sharp price rises, and the southern regions showing a mild slowdown.

Chartered surveyor estate agents reported a decline in the number of people looking for properties to buy, the first fall since December last year. This decline is also the largest recorded since April 2003, when uncertainty over the Iraq war temporarily suppressed demand.

Surveyors also predict a continuing rise in house prices, but optimism is at its lowest level since July last year. Expectations for rises are strongest in the North West and Wales while, at best, a static market is expected across the South East and East Midlands.

The number of properties coming onto the market remains low and stocks of unsold properties on the survey respondents’ books fell in May to the lowest recorded level since August 1979. Completed property sales fell to 30 per agent for the quarter to May, down 5 percent since February.

Speculation continues in the market place over whether buy-to-let investors will put their properties on the market, spurred on by fears of a housing market crash or large hikes in interest rates. Recent RICS lettings reports have found that the percentage of landlords selling-up at the end of a tenancy remains at around 11 or 12 percent.

RICS housing spokesman, Ian Perry, says: “We would expect the number of house sales to be down slightly in May because of the two Bank Holidays falling during this month quickly followed by school half-term. Nevertheless, heated speculation over interest rates has cooled buyer activity and last week’s rate rise confirms the upward trend is likely to dampen any further price surges.”

“The number of unsold properties in estate agents windows is at its lowest since 1979.”

“Some survey respondents, particularly in London, are saying that although they are conducting a lot of valuations only a small percentage of properties are coming onto their books causing aggressive fee cutting and over-valuing of properties to become commonplace as agents compete for business.”

“The latest interest rate rise in June brings the cumulative increase since last November to 1 percent. This should slow price rises in the latter half of the year, with surveyor confidence in the price outlook taking a knock.”