There was an average of 34 homes available for sale per estate agent branch, according to the August residential market survey from the Royal Institution of Chartered Surveyors (RICS).

This has propped up house prices, however, as 53% of surveyor respondents said they had seen increases during the month. Although this was down from a balance of 62% in July, it is above the long running average of 13%.

However, this is expected to weaken in the future, with just 3% of respondents predicting prices will rise over the next 12 months compared to 30% in July. This is also down on the 12-month prediction of 78% in February.

The supply issue is not expected to improve, with new instructions to sell slipping to negative 15% compared to negative 6% in July.

RICS survey statistics are presented as scores between negative 100 and 100, with negative scores implying a decline, and positive readings suggesting an increase.

Sales demand falls

New buyer enquiries dropped for the fourth consecutive month, from a reading of negative 26% to negative 39%. RICS said this fall was “relatively sharp” and was the weakest buyer sentiment since April 2020.

Respondents saw a decline in agreed sales, with a score of negative 22% in August, down from negative 13% in July. This is the fifth month in a row that agreed sales have decreased.

Tarrant Parsons, senior economist at RICS, said: “Concerns over the economic backdrop and rising interest rates continue to take their toll on market momentum, with strong activity early in the year now giving way to a more subdued picture.

“Moreover, given projections for the UK economy point to a potential recession emerging towards the end of 2022, respondents envisage housing sales continuing to slip in the coming months. For the time being at least, the lack of stock available on the market is still providing support to house prices, which continue to rise, even if the pace of growth has cooled over recent months.”

Stock shortage driving prices

Tomer Aboody, director of property lender MT Finance, said that the mismatch between supply and demand in the property market was “maintaining steep house prices”, and that there were “ready buyers” looking to “make a move and take advantage before interest rates rise even higher”.

He added there was a lot of uncertainty over the next 12 to 24 months, but the market would start to stabilise. However, whether there would be a crash remained to be seen.

“There would need to be high sales volumes at lower prices for that to happen but with inflation rising there will be worried homeowners who bought in the past few years. Let’s hope Liz Truss’ appointment results in some quick assistance to manage the pain,” Aboody said.

Jeremy Leaf, north London estate agent and a former RICS residential chairman, noted: “It’s becoming increasingly clear – and not just at the coalface – that the shortage of stock is continuing to support prices but at the same time disguising the impact of the rising cost of living on the rest of the market.”

He added that another problem was that demand could “disappear if not satisfied fairly quickly so prices may soften further”.

“Nevertheless, we’re not seeing widespread renegotiations or buyer withdrawals so don’t expect a significant correction yet although the market is certainly more price sensitive than a few months ago,” Leaf said.