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RICS warns house price rise may be unsustainable in 2010

Surveyors have warned that house prices may hit pre-Credit Crunch highs this year if demand from buyers continues to outstrip the number of houses being put up for sale.

The warning came from the Royal Institution of Chartered Surveyors’ (RICS) senior economist Oliver Gilmartin who was commenting on figures from the British Bankers Association (BBA) which show that the number of mortgage approvals is rising steadily.

Mr Gilmartin said: “The BBA numbers add further weight to our view that house prices will continue to move higher during early 2010. Lending from mainstream banks has returned to levels last seen two years ago, although remains around 30% below the levels predating the credit crunch.

“The rise in demand continues to outstrip supply, although recent indications are that potential vendors that became “reluctant landlords” at the start of the downturn, may be taking this improved pricing environment to place properties for sale.

“There are growing concerns that current momentum in the market will see house prices move close to pre-crisis highs in 2010 stretching affordability further.

“However, RICS expect the market to take a reality check in the second half of 2010, as longer term borrowing costs start to rise pushing the costs of funding for fixed rate mortgages upwards. But, despite some moderation in the second half of the year, house prices could well end the year marginally higher.”

Jennifer Welch, operations director for RICS North East said: “While on the face of it a rise in prices would seem to be good for home owners in the region, what we really need a period of stability and to avoid falling back into the unsustainable situation where buyers need 100% mortgages of five times joint salary to purchase a home.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .