RICS upbeat on house prices for 2009

House prices will end 2009 higher than they started the year due to price rises in certain areas over the past few months, according to the Royal Institution of Chartered Surveyors (RICS).

In its latest housing market update, the trade body says it no longer expects house prices to fall by between 10% and 15% this year due to a considerable shift in market sentiment.

It is also optimistic mortgage approvals will increase to around 55,000 a month for the remainder of the year due to a continued rise in new buyer enquiries. RICS now believes mortgage approvals could potentially end 2009 nearly twice as high than at the end of 2008.

Despite this, RICS also forecasts a return to a more orderly market is still some way off as activity remains very weak. The body points out transactions remain well below the average and housing supply is still a long-term problem.

It believes further increases in mortgage rates, rising unemployment or prolonged weakness in the economy could all challenge the emerging recovery in the market.

However, Brigid O'Leary, senior economist at RICS, says the return of buyer demand and the limited availability of housing on the market could be enough to support prices.

She adds: "There has been a clear change in the housing market over the past few months and, as a result, it is unlikely we will now see the kind of house price falls widely predicted at the start of the year."