London house prices continue falling in October, RICS says

House prices in London continued falling in October even as the rest of the country, barring the North East, where they remained broadly stable, saw prices creep higher again, but only as a result of the dire shortage of available housing across the UK, according to one of the most widely-followed surveys of the sector.

The headline national price balance crept higher from 18% in September to 23% in October (consensus: 17%) as house hunters continued to return to the market after the referendum, according to the Royal Institution of Chartered Surveyors (RICS).

Commenting on the results, Simon Rubinsohn, RICS's chief economist, said: "The dire shortage of available housing across the UK is continuing to push prices upwards, regardless of the uncertainty linked to the ongoing discussions surrounding Brexit. We are only weeks away from the Autumn Statement and it will be interesting to see what measures – if any - the Chancellor will put in place to increase housing supply and create a more affordable market."

In London however, the data revealed the eighth consecutive negative monthly reading with 16% more respondents reporting a fall rather than a rise, while in the North East prices were reported to be broadly stable.

Nonetheless, inner London was the main drag on prices, with the outer boroughs continuing to see significant house price gains.

The firmest price momentum was reported this month in the West-Midlands and in the North West English regions, with a net 55% and 47% of surveyors respectively reporting growth.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics emphasised how prices continued to fall in central London and the North East, adding that the national recovery in demand looked "fragile".

"The national recovery in demand also looks fragile; mortgage rates now have little scope to fall further and households will endure a renewed real income squeeze next year. As a result, we still expect house prices to rise by only around 2% in 2017,2 Tombs said.

Agreed sales rose very modestly, with a net balance of 5% of surveyors reporting growth and more areas seeing activity rise rather than fall.

A net balance of 25% of respondents forecast a rise in transaction levels in the future - a slight improvement.

"Near term price expectations increased slightly but still point to very limited growth over the months to come," RICS said in a statement.

Lettings market also weak in London

Rental demand meanwhile continued to outpace new supply in all areas of the UK except London, with the headline level showing a net balance of 29% of surveyors reported a rise over the three months to October, versus 10% in the three months to July.

In London, demand fell for the second consecutive quarter with 15% of contributors reporting decreases.

Sluggish demand in the capital is taking a toll on rent expectations, leading to a net 12% of contributors predicting a fall in rents over the next three months, RICS said.

At a national level, expectations for rent prices did the opposite and rose firmly with 34% more respondents forecasting a rise in the months to come, up from 15% in the three months to June.

Most markets "fairly priced"

At 61%, a majority of respondents felt that their local markets were priced at a fair value with 37% thinking they are overpriced. People in the South East and London contain the largest proportion of respondents who feel that market prices are above 'fair value' at present.

On the supply side, respondents reported a further slight fall in new instructions over the month with tight supply conditions still a dominant feature of the current market.