The fall in the number of homes for sale is down on a combination of strong demand and the high number of first-time buyers entering the market, according to the Royal Institution of Chartered Surveyors (RICS) whose survey covered the last three months of 1997. Five interest-rate rises since the general election and worries about the Far East economic crisis have taken their toll, ensuring that prices increases this year will be lower that in 1997.
More than half of the respondents to a RICS survey expected house prices in the South-east to rise in the first quarter of 1998 but said they would be nothing like the 25 per cent growth seen last year. The majority of the forecasts put future south-east increases at 2 per cent or lower, while across the country the figure is expected to be 6 per cent compared with 7-9 per cent growth last year.
The figures back up reports showing December was marked by a significant downturn in prices. RICS said 18.5 per cent more estate agents expected prices to rise than fall, compared with 48 per cent for the same period last year.
Today, Nationwide Building Society said house prices rose by an average of 2.4 per cent in the last three months of 1997 - giving an annual increase of 12.1 per cent by the end of December. Nationally, prices were close to their 1989 peak although, after allowing for inflation, they remained about 30 per cent lower, Nationwide said.
And after a year dominated by supply shortages, the market appeared to be slowing, with rising prices decelerating and sales flat. The slowdown in the South-east was even more pronounced - 14.3 per cent more estate agents expected a rise than a fall in prices, down from 76 per cent a year earlier.
After soaring in 1997 as the economy boomed, UK house prices look set to rise more slowly this year, analysts said.
RICS believes the news is good for homeowners. Ian Perry, a RICS spokesman, said: "The current drop in price rises will result in steadier, sustainable growth.... We look forward to seeing equilibrium return to the market in 1998."