London - Britain’s housing shortage and continued growth in prices means the property market is showing increasing signs of dysfunction, according to a report from the Royal Institution of Chartered Surveyors.
While the general election had an impact on activity in May, damping buyer demand and new sellers coming to the market, RICS used its latest monthly report to highlight broader, and more damaging, risks. That includes the dearth of homes for sale, which has pushed up values in recent years, cutting off many potential first-time buyers.
RICS chief economist Simon Rubinsohn said the report shows the issue of affordability may even worsen further.
“Perhaps the most ominous signal is that contributors still expect house prices to increase at a faster pace than wages over the medium term despite the difficulty many first-time buyers are clearly having,” he said. On the shortage, "it’s hard to see this as anything other a major obstacle to the efficient functioning of the housing market."
In May, RICS’s monthly price index fell to 17 - the lowest since August - from 23 in April, indicating modest price gains. A gauge for London, where prime properties have been under pressure, remained below zero for a 14th month.
Nationally, the supply-demand imbalance means it’s a sellers’ market and recent reports show that any uncertainty about the election had little effect on UK asking prices, which according to Rightmove jumped 1.2% to a record in May. For some, it’s reminiscent of the overheating seen before the financial crisis.
"Prices are too expensive," Josh Homans at surveyors Valunation said in the RICS report. "Excessive" valuations are increasing and "we are now in a 2007 situation," he said.Read Fin24's top stories trending on Twitter: Fin24’s top stories