Mortgage loans have continued to rise as confidence in the    housing market recovers    000s, mortgage approvals

The Royal Institution of Chartered Surveyors said in its November/December UK Economic Brief out yesterday that the residential property market continues to recover with activity levels showing a sustained upturn. House prices had slipped back again in October, though the decline was slight, and the slowest in 15 months.

Across southern England house prices have either stabilised or shown marginal declines, though in the case of London prices showed the first increase in almost 1½ years.

Prices continued to fall back in northern England and the Midlands, though they rose in the North West and Scotland.

The number of new buyer enquiries showed a fourth consecutive increase in October, said the surveyors, and is the largest recorded in almost two years. Demand conditions have been helped by the August interest rate cut which removed lingering uncertainty over the direction of interest rates.

Rising employment has also lent support to the demand for homes. It is interesting to note also that interest rates on fixed rate mortgages have been falling for sometime, and are down almost 1% in the past year. This has offset some of the detrimental market impact that may have arisen due to Bank of England interest rate hikes in 2004.

Nevertheless, market conditions are only gradually tightening with a modest recovery in sales activity recorded by surveyors.

Completed sales have risen almost 8% from their low in February but are still down 5% from year ago levels. With sales rising, the stock of available property on surveyors’ books have also fallen, down 4% in the past three months.

The market is still tilted in favour of would-be buyers, though is beginning to shift as the recovery has been sustained.

Despite first estimates of third quarter growth coming in below trend, the economy continues to create jobs - 350,000 since this time last year. The combination of large employment increases and solid earnings growth ensures continued organic demand for housing going forward. Moreover, the economy is also once again showing signs of a moderate pick-up.