House prices 'expected to rise at faster pace than wages' over coming years

House prices are still expected to increase by around 3.5% per year over the next five years, despite signs that the market has become more subdued recently, according to surveyors.

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In an "ominous signal" for aspiring first-time buyers, surveyors anticipate house price inflation will continue to out-pace wage growth, the Royal Institution of Chartered Surveyors (Rics) said.

The General Election does appear to have prompted more home buyers and sellers to adopt a "wait and see" approach, as the number of new buyer enquiries, the volume of fresh property coming to market and the number of sales agreed all fell in May, Rics said.

Despite the more subdued market, surveyors taking part in the report expected house price inflation to average 3.5% per year across the UK over the next five years.

Property stock levels remain at all-time lows, Rics said, with an average of 43 unsold homes on estate agents' books. It said a "sheer lack of supply continues to support prices for the time being".

Over the next 12 months, surveyors expect house sales to pick up, with a net balance of 26% expecting sales activity to increase rather than decrease.

Surveyors in the South West of England and Wales are the most upbeat about sales levels in the next 12 months, the report found.

House prices generally continued on an upward march in May, with a net balance of 17% of surveyors reporting increases rather than decreases, down from a balance of 22% the previous month.

May's house price reading is the weakest since August 2016, but it still indicates modest house price gains, Rics said.

Beneath the national trend however, house prices continued to slip in central London, while property price inflation in East Anglia had "moderated noticeably" since the start of 2017, with little change reported there over the last two months, the report found.

Across the rest of the UK, house prices are continuing to rise, it said, although surveyors' expectations point to a potential weakness in the South East of England in the next few months ahead of "solid growth" there over the coming year.

Simon Rubinsohn, chief economist at Rics, said: "Although the latest survey suggests that uncertainty related to the General Election may have contributed to what appears to have been a disappointing level of transactions in the housing market over the spring, perhaps the most ominous signal emanating from the data released today is that contributors still expect house prices to increase at a faster pace than wages over the medium-term despite the difficulty many first-time buyers are clearly having in taking their first steps onto the property ladder."