Demand for homes fuels UK housing boom

UK property transactions are returning to pre-pandemic levels amid a surge in buyer and tenant demand, a survey reveals.

The Royal Institution of Chartered Surveyors (RICS) said a net balance of 74% of its members reported a rise in house prices in January, the highest figure since July.

On a regional level, the most significant growth reported in property prices was focused in the North West and South East of England. All UK regions are expected to see a further increases in house prices over the year ahead.

However, the survey was conducted before the Bank of England’s decision in early February to increase interest rates. The hike could now put some people off from buying a new property, RICS warned.

"There is an inevitable question mark over the impact of rising interest rates allied to the jump in the cost of living on homebuyer sentiment," RICS chief economist Simon Rubinsohn said.

Read more: UK house prices hit new high for January as market faces cooldown

The average time it takes to finalise a sale, from listing to completion, has now fallen to an average of sixteen weeks, one week less than in September 2021. This is also the quickest turnaround time since December 2019, indicating that sale speeds have returned to near pre-pandemic levels.

Looking to the next three months, new sales expectations from respondents improved with the latest net balance up to 22%, representing a ten-month high. When looking at the next year, sales were expected to improve by 24% of respondents.

Demand from tenants in the rental market also continued to rise, according to a net balance of 64% of respondents, representing the strongest on record since 1999, whilst landlord instructions remained in decline according to 15%.

Given this ongoing mismatch between tenant demand and property supply, a net balance of 59% respondents said they expect rents to increase over the next three months.

Read more: Cost of living crisis: UK rents rise to 13-year high

“Notwithstanding these developing themes, for the time being the signals on the outlook for both prices and rents remains a little worrisome with the twelve-month RICS indicators for both at, or near, series highs,” Rubinsohn added.

Myron Jobson, senior personal finance analyst at Interactive Investor, said: “Demand for property far outstripping supply is now an all too familiar story in this property market and continues to push prices higher. Property values are hitting the ceiling of what many buyers can afford to pay.

“Wannabe homeowners are being forced out of the property market, with many delaying their plans to buy a property amid runaway price rises, and raising a sufficient deposit still poses a significant additional challenge.”

New data from mortgage lender Halifax showed the average house price in the UK reached £276,759 in January.

This was up around £24,500 on the same time last year, and £37,500 higher than two years ago, before the coronavirus pandemic.

Watch: Am I wasting my money by renting?