Lack of supply pushing up prices

The net balance of Chartered Surveyors reporting rises rather than falls in house prices reached a positive reading of 22% in September, up from 10% in August - this is the highest result since May 2007 when the net balance was 25%. The South of England is leading the upturn in prices with the net balance of surveyors reporting rises rather than falls for London and the South East climbing to 79% and 52% respectively. Elsewhere, the picture is less rosy with Wales and Yorkshire and Humberside registering negative net balances of 15% and 18%.

Last month's optimism that vendors were starting to return to the market has proved a little premature. A net balance of only 4% of surveyors reported that new instructions had increased in September, compared to a reading of 12% in August. Correspondingly, the average number of unsold properties on surveyors' books remained unchanged at 64.

Meanwhile, transaction levels continued to improve in September with sales per surveyor rising to 18 over the past three months. As a result, the closely watched sales to stock ratio - a measure of market slack and a lead indicator of future prices-edged upwards a little further. It has now risen for nine consecutive months and stands at 29, its highest level since December 2007.

The pace of improvement in buyer interest slowed for the third consecutive month. The net balance of surveyors reporting an increase rather than a decrease in new buyer enquiries slipped from 47% in August to 36% in September. The number of surveyors reporting a rise in new buyer enquires in London dropped back from 71% to 45%.

Commenting, RICS spokesperson Ian Perry said: "A lack of supply is still underpinning the rise in house prices with new instructions to estate agents only edging up very gradually. Meanwhile despite the problems first-time buyers are continuing to encounter in securing finance, the level of enquiries from potential purchasers is increasing. This imbalance between demand and supply suggests that house prices will move higher in the near term."