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Thursday, 18 July, 2002, 14:28 GMT 15:28 UK
Housing shortage drives prices higher
People moving home
Not enough properties are coming onto the market
A lack of suitable properties is pushing UK house prices higher, a survey of property experts has revealed.

But the study. by the Royal Institution of Chartered Surveyors (Rics), also said that price rises could cool in the coming months, as buyers became reluctant to pay too much for properties.

Separate figures released on Thursday also suggested a cooling in the housing market.

Both the Council of Mortgage Lenders (CML) and the British Bankers' Association (BBA) reported a fall in new mortgage borrowing last month.

Also on Thursday, Northern Rock bank reported a 16% increase in half-year profits, as its business benefited from the strength of the housing market.

Onwards and upwards

Recent house price surveys from the major mortgage lenders have shown prices rising at record rates of nearly 20% a year.


There is growing anecdotal evidence that buyers are becoming reluctant to meet high prices

Ian Perry, RICS

The rapid increase has raised fears that the boom could be followed by a bust, similar to that seen in the early 1990s.

The Rics survey found that the difference between the number of chartered surveyors reporting price rises and falls rose to 65% last month, from 61% in May.

"The continued shortage of houses coming on to the market has been the main driving force for price inflation and there are no signs of it easing," said Ian Perry, the Rics national housing spokesman.

Fewer inquiries

But Mr Perry warned over increasing caution among buyers.

Man looking in estate agent's window
Searching for that dream home

"Many surveyors are now reporting a fall in new inquiries from would-be purchasers," he said.

"Some of the fall-off will be seasonal, but there is growing anecdotal evidence that buyers are becoming reluctant to meet high prices.

"This could be reflected in prices over the coming months."

On Thursday the government outlined details of a 1.1bn expansion in house building in the south east of England.

The plans could lead to 200,000 new homes being built in the region, with thousands of subsidised properties for key workers such as nurses and teachers.

But Rics has already said that the extra cash the government is putting into house building is unlikely to have much impact on rising house prices.

Lending slows

New lending figures have suggested that some heat may be coming out of the housing market.

The Council of Mortgage Lenders said total new lending last month was 17.1bn, compared with the 20.3bn reported in May.

Meanwhile the British Bankers' Association said net lending, which takes into account redemptions and repayments, fell to 4.15bn last month, after hitting 5.19bn in May.

'Buoyant' market

Northern Rock credited the strong housing market with helping boost pre-tax profits to 152.6m for the six months to 30 June, compared with 131.2m a year before.

Northern Rock branch
Northern Rock has increased its bad debt provisions
The bank saw net lending rise by one half to 3.5bn.

And it said it expected the mortgage market "to remain buoyant" for the rest of the year, despite a slowdown in house prices rises.

"The housing market will slow," said chief executive Adam Applegarth

"But the economic conditions of historically low interest rates, low unemployment and the lack of supply of new housing stock should underpin the mortgage market going forward."

However, in a possible sign of growing caution, the bank said it had increased provisions for bad debts from 11.6m to 20.9m.

 WATCH/LISTEN
 ON THIS STORY
The BBC's Brian Milligan
"The peak of the market may be near"

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17 Jul 02 | Business
16 Jul 02 | Business
15 Jul 02 | Politics
20 Jun 02 | Business
18 Jun 02 | Business
13 Jun 02 | Business
22 May 02 | Business
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