Figures published today show that a record number of potential house buyers outnumbered sellers by a margin of more than two to one last month - suggesting that prices could continue rising despite last week's interest rate rise.
More than 1.5 million new buyers registered with estate agents in the UK last month, the highest number on record, the figures show. While the vast majority of these buyers are existing home owners, they are refusing to put their own property on the market, it said.
Your Move, an estate agents chain, said it estimated that 1.52 million new buyers registered with UK estate agents in July. However only 633,000 properties are currently on the market in the UK, meaning that buyers are out numbering sellers by almost 2.5 to 1.
David Newnes, managing director of Your Move Estate Agents, said: "While the number of active buyers has reached a record high, a reluctance to put their own properties onto the market has resulted in an acute shortage of supply. With too many buyers chasing too few sellers, the pressure for property prices to rise further will only intensify."
Soaring house prices was cited by the Bank of England as one of the reasons for its unexpected decision to raise the base rate by a quarter-point last week to 4.75 per cent. Many industry experts believe the housing market will be able to take the rise in borrowing costs in its stride as it is so well supported by factors such as a lack of supply. Peter Bolton King, chief executive of the National Association of Estate Agents, said: "As interest rates are still at low levels compared with past averages, we believe the property market can absorb a 0.25 per cent rise this time."
Analysts are split over whether last week's was the first of many or simply a "stitch in time" to prevent the need for higher rates. They will look to this week's briefing by Mervyn King, the Governor of the Bank of England, to answer that question at the launch of the Bank's quarterly inflation report.
Michael Saunders, an economist at Citigroup, said last week's increase simply fulfilled the tightening that was implicit in the Bank's May inflation report.But Robert Barrie, chief European economist at Credit Suisse, said: "You don't raise rates once unless and until you are prepared to do it more than once.
"It takes more than [a quarter-point] to make much difference to anything."Reuse content