Strong demand boosts housing market

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Inquiries from new buyers increased for the seventh month in a row to reach its highest level since August 1999, said the Royal Institution of Chartered Surveyors (Rics).

The number of properties sold by estate agents also continued to rise.

The average was 11.8 sales during the three months to the end of May, up from 10.6 in the three months to the end of April.

The lack of supply combined with the increase in demand helped to provide some support for house prices, with the balance of surveyors reporting price falls rather than price rises dropping from 58.7% to 44.1%.

Only 11% more chartered surveyors expect to see further price falls going forward, compared with those who think there will be rises. That is the lowest level since July 2007 when the housing market correction first began.

At the same time, 40% more surveyors expect sales levels to rise in the coming months, the highest level since the question was first asked in 1998.

The Rics survey is the latest in a run of positive data on the housing market, with both Nationwide and Halifax reporting price rises during May of 1.2% and 2.6% respectively.

But despite rising sales and increasing numbers of mortgages being approved for house purchase, economists have warned that any recovery in the housing market is likely to be constrained by rising unemployment and the ongoing problems in the mortgage market.

Rics spokesman Ian Perry said: "On the face of it, the housing market does appear to be close to bottoming out, with activity picking up in a material way and prices at last stabilising. However, it is important to remember that the lack of supply has been as important in underpinning prices as the rise in demand."