Homes for sale at eight-year low as owners wait

The number of homes for sale in England and Wales has fallen to an eight-year low, prompting fears of a property famine as sellers wait for further price increases before placing their houses on the market.

The Royal Institute of Chartered Surveyors said the refusal of homeowners to put properties up for sale created a vicious circle because it meant they in turn could not find something suitable to buy.

The RICS report yesterday came as a separate survey said consumer confidence remained close to its highest level since 1988, due to optimism about general economic prospects. This news was taken well in the City, and the FTSE 100 share index reached a fresh record, closing 20 points up at 4,073.

Although the level of confidence has not changed during the month following a big jump in September, it remains high by past standards, according to the regular poll carried out for the European Commission by researchers GfK.

There was also an increase in the proportion saying they planned to buy a house or spend more on home improvements during the next 12 months.

The RICS survey said the number of properties for sale across the country was one-third lower during the period compared with the previous three months.

Among the reasons given for waiting before putting a property up for sale is the continuing negative and insufficient equity in vendors' homes, making it hard for them to sell. Also, some owners are unwilling to sell because they are waiting for free shares from building societies' demutualisation plans.

A RICS spokesman said: "The scarcity is forcing up prices but it also means reasonably priced, desirable properties are being sold extremely quickly, giving the false impression that a boom is imminent. One of the main reasons for homeowners' reluctance to put their properties on the market is their sometimes over-optimistic expectation of further price rises."

Consumers questioned for the EC poll this month were more glum about prospects for their own personal finances but more optimistic about the economy in general. Respondents expect unemployment to fall further.

Figures due out tomorrow and Friday will be scrutinised for signs that the improving "feel-good" factor is being reflected in official economic statistics. While City analysts expect tomorrow's retail sales figures to show a drop during September following a bumper August, they expect them to show continuing strong year-on-year growth.

The estimate of third-quarter GDP due on Friday could turn out to be important for next week's monetary meeting between Kenneth Clarke, Chancellor of the Exchequer, and Eddie George, Governor of the Bank of England.

The Governor has made it clear he thinks the economy's strong growth means there is a significant risk of missing the inflation target.