New home shortage threatening to push up prices

A shortage of new homes is threatening to push UK house prices up again after a slowdown in growth this year.

The cooling market had come as a relief both to policy makers worried about a property bubble and to those trying to get on the home ownership ladder.

But the Royal Institution of Chartered Surveyors has warned the relief could only be temporary. Rics members are involved at the start of the house buying process so the survey is considered one of the best forward looking indicators.

It reports that the number of properties coming on to the market fell for the second consecutive month in March, while demand remained steady, leading to a sharp increase in the proportion of surveyors reporting price rises.

Simon Rubinsohn, chief economist at Rics, said signs that price growth could accelerate again were "worrying", adding there was a "real housing crisis that will urgently need to be addressed by the next government."

The net balance of surveyors expecting prices to rise in the year to come reached a ten-month high of 70 per cent.

The main exception to the pattern is London, where surveyors expect the market to continue cooling after powerful growth last year.

Rics also joined in the chorus of criticism of a Conservative manifesto promise to extend the right-to-buy house purchase scheme to more housing association tenants, offering discounts of up to 70 per cent on the value of the property.

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Jeremy Blackburn, head of policy at Rics, said the proposal would "help relatively small numbers of tenants to move into home ownership, without doing anything to solve the shortage in overall housing supply."

He added home ownership is "at the core of our economy" but it was vital to ensure there was enough housing stock "particularly for those on lower incomes".

The Conservative manifesto also includes a promise to build more new homes, but Matthew Pointon, property economist at Capital Economics, said "those promises have been made before" adding it will be "challenge" to ensure there is one-to-one replacement for social housing that is sold off.

"Giving a select lucky few a large subsidy to buy a home may help some of them, but by reducing the efficiency of how the housing stock is used will just make it that much harder for the next generation to buy or rent a home."

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