UK house prices keep on rising despite squeezed budgets: RICS

House price growth in Britain hit a new eight-month high in February as the housing market showed little sign of losing momentum amid a growing cost-of-living squeeze, a survey showed on Thursday.

The Royal Institution of Chartered Surveyors (RICS) said a net balance of +79% of its members reported a rise in house prices in February, up from +74% in January and its highest since June. A Reuters poll of economists had pointed to a reading of +73%.

The report echoed other surveys that show Britain’s housing market retained much of its momentum going into 2022, despite the phasing out of temporary tax breaks on property purchases in the second half of 2021.

But with household budgets being squeezed by high inflation and imminent tax rises, RICS had doubts about whether the housing market can keep up its recent strength – even though there is scant sign of a slowdown now.

“Huge clouds of uncertainty hang over the economic prospects as energy prices continue to surge and the Bank of England grapples with how to manage monetary policy in this challenging environment,” said Simon Rubinsohn, RICS chief economist.

“Despite all of this, there is little evidence yet that the mood music regarding the expectations for house prices or rents is shifting.”

Expectations for house price growth in the coming 12 months were strong cross all parts of the United Kingdom, the survey showed.

Rents were expected to increase by an average 4.5% over the next 12 months. The proportion of surveyors expecting rents to rise was the highest since December 2012, RICS said.

Rubinsohn said the mismatch between strong demand and a shortage of sellers would likely keep prices high.

“The risk is that these imbalances exacerbate the cost-of-living crisis and the challenges particularly for those on lower incomes,” he said.