Shortage of homes set to fuel new price boom

THERE could be another boom in house prices by the end of the year as the supply of homes being put up for sale dwindles.

Figures from the Royal Institution of Chartered Surveyors due this week are expected to show that enquiries from potential new buyers are surging, but the number of people putting their properties on the market is falling.

The balance of buyers and sellers is seen as a leading indicator of price moves.

Hansen Lu, a housing market expert at consultancy Capital Economics, said last week: ‘A strong economy and healthy mortgage market have boosted the number of prospective house buyers.

‘But with no commensurate rise in homes for sale, the shortage of homes on the market has deepened, leading to reduced transactions and higher prices.

‘With few signs that market conditions will loosen soon, price growth should accelerate towards the end of the year.’

Meanwhile, the Bank of England is meeting this week to decide whether to lift interest rates, but economists are not predicting a rise until next year.

The US Federal Reserve is thought to be likely to increase rates later this month.

Bank governor Mark Carney suggested last weekend that the turmoil seen in stock markets during August would not change the Bank’s strategy on interest rates.

The Monetary Policy Committee voted 8:1 to hold rates steady last month and is expected to do the same again this week.

Surveys last week of the manufacturing, construction and services sectors all suggested that the economy was not growing as quickly as it was earlier in the year, dampening expectations of an early rate rise.

Howard Archer, chief UK economist at analysts IHS Global, said: ‘We currently believe that the first Bank of England interest rate hike from 0.50 per cent to 0.75 per cent is now more likely to occur in the second quarter of 2016 than the first.’

But he added: ‘A first quarter hike should certainly not be ruled out.’