An increase in buyer enquiries and sales has given a much-needed boost of confidence to the housing market, which, combined with a reduction in the number of houses for sale, has begun to support higher house prices.

The latest housing market survey from the Royal Institute of Chartered Surveyors (RICS), published today, has reported that buyer enquiries were up in May, with 48 per cent of chartered surveyors reporting a rise rather than a decline.

May’s figures mark the seventh consecutive monthly gain, and a small increase in sales suggests that the housing market might have bottomed out and is now beginning to stabilise.

According to the report, an average 11.8 properties were sold over the last three months, up from 10.6 per cent on the previous three months.

Simultaneously, the number of surveyors reporting a fall in house prices fell from a negative 58.7 per cent to 44.1 per cent.

A falling supply of properties, decreasing from 69.4 on the market in April to 58.4 in May, has supported this, with supply and demand acting as a catalyst on house prices.

Consequently, the sales to stock ratio, a key indicator of market conditions, saw a significant increase from 15.2 to 20.1 in May.

The results of the report have improved the outlook for the housing market, with expectations for house sales and prices rising markedly amongst chartered surveyors; 40 per cent more expected sales levels to increase than in April – the highest figure since the survey began more than a decade ago.

Compared to almost 50 per cent in April, just 11 per cent more surveyors are expecting prices to fall further rather than rise, which represents the most positive outlook since July 2007.

“On the face of it, the housing market does appear to be close to bottoming out with activity picking up in a material way and prices at last stabilising” said RICS spokesperson Ian Perry.

“However it is important to remember that the lack of supply has been as important in underpinning prices as the rise in demand,” he continued. “Moreover, with the economic backdrop still quite uncertain, unemployment is set to continue increasing sharply and finance for first time buyers is still in short supply, there are a number of significant obstacles for the market to overcome over the coming months.”

Michael Coogan, director general at the Council of Mortgage Lenders (CML) shares Mr Perry’s concerns about being overly optimistic.

The CML announced a nine per cent drop in mortgage lending in April, causing Mr Coogan to claim that “It’s still too early to spot a clear pattern of recovery in the housing market as some commentators have suggested,” but May’s mortgage figures remain to be seen.

© Fair Investment Company Ltd