UK house prices set to rise 8% in 2014, says RICS

Surveyor warns the demand and supply imbalance remains the biggest challenge facing the residential market

UK house prices are set to rise by a further 8 per cent in 2014 as demand continues to exceed supply, surveyors have forecast.

The Royal Institutions of Chartered Surveyors (RICS) estimates that all parts of the UK "should see" home prices rise, with London set for another 11 per cent jump.

The surveyor warns the "acute" demand and supply imbalance remains the biggest challenge facing the residential market.

RICS expects the number of transactions to increase to 1.2 million in 2014, but warns that this is still short of the 1.67 million sales seen back in 2006.

The estimated jump in construction starts to 155,000 in 2014 from 125,000 this year could be insufficient given the rapid growth in population, it added.

RICS director Peter Bolton King said: "We expect all areas of the country to see prices increase, with London, predictably, recording the biggest rises.

"The improving economic picture aside, this is largely down to the fact that buyer numbers considerably outweigh the amount of homes on the market.

"While the number of new homes being built is now on the rise, it still won't be anywhere near enough to meet demand and we expect the problem of insufficient housing stock to be the main driver behind price increases over the next 12 months."

The surge in home prices has ignited fears of a housing bubble.

Last month, the Bank of England announced that Funding For Lending will no longer cover new housing loans extended by banks from 2014, focusing solely on boosting loans to businesses.

Regional prices are set to rise by the following percentages in 2014, according to RICS:

:: London 11%

:: East of England 10%

:: East Midlands 10%

:: North West 7%

:: Scotland 7%

:: South East 7%

:: South West 7%

:: Wales 7%

:: West Midlands 7%

:: Yorkshire and Humberside 7%

:: North East 5%

:: Northern Ireland 4%

Additional reporting agencies