U.K. Housing Market Strengthens on Home Shortage, RICS Says

By Svenja O’Donnell

Oct. 13 (Bloomberg) -- The U.K. housing market strengthened in September as the proportion of surveyors and real-estate agents reporting higher prices rose to the highest since May 2007, the Royal Institution of Chartered Surveyors said.

The number of respondents saying prices rose exceeded those reporting declines by 22 percentage points, compared with 10 percent in August, RICS said in its monthly survey today in London. A separate report showed retail sales at stores open at least a year rose on an annual basis by the most in five months.

“A lack of supply is still underpinning the rise in house prices with new instructions to estate agents only edging up very gradually,” RICS spokesman Ian Perry said in the statement. “This imbalance between demand and supply suggests that house prices will move higher in the near term.”

The Bank of England says that rising asset prices may buoy the economy and encourage Britain’s recovery from recession. The Council of Mortgage Lenders said yesterday that banks approved almost a third more loans in August than a year ago, while other reports also signal the housing market is picking up as consumer confidence strengthens.

The RICS report shows sentiment in the housing market is now at its highest since before the onset of the financial crisis in August 2007. House prices peaked in October 2007, according to Nationwide Building Society.

The number of surveyors reporting price gains was highest in London, with a balance of 79 percentage points, followed by 52 percentage points in the South East, the report showed. The overall balance of surveyors expecting gains in prices over the next three months rose to 25 percentage points, from 18 percentage points in August.

Buyers Competing

September “has seen price rises but only because there is a continued shortage of quality property,” said Benson Beard, a surveyor at Bective Leslie Marsh in London. “Buyers are having to compete, resulting in some prices being achieved at a level similar to that of 2007. This situation is unlikely to last long as more properties will come to the market, satisfying demand.”

The U.K. economy shrank 0.6 percent in the second quarter, less than previously estimated, and the National Institute of Economics and Social Research said last week gross domestic product stopped falling in the three months through September.

Retail sales are also increasing as consumer confidence returns. Sales at U.K. stores open at least a year rose 2.8 percent in September, compared with a 1.5 percent drop a year earlier, the British Retail Consortium said today.

Other reports this month have shown house prices gained. Halifax said last week that house prices increased for a third month in September, while Nationwide on Oct. 2 reported gains in house prices for the fifth consecutive month in September.

To contact the reporter on this story: Svenja O’Donnell in London at sodonnell@bloomberg.net.