HOUSE price increases reached an end of year high in December despite difficulties caused by a shortage of properties coming onto the market and the prospect of interest rate hikes.

According to the Royal Institution of Chartered Surveyors (RICS), in its latest survey of the housing market, the number of properties on surveyors’ books is close to its lowest level for a year and there are signs that buyers are getting discouraged.

New seller instructions have continued to fall in the South East, meaning the comparison between unsold stock and houses sold is good. Although the rate of rise of house prices in the region has steadied, the increase is largely down to a lack of availability of property on the market.

In December, the pool of property available to buyers was shrinking to low levels with fewer people putting their property on the market. Following an initial spurt in the run-up to the Iraq war, a decline in instructions has been seen throughout 2003.

Surveyors remain optimistic about sales in the Spring, although they have scaled back their expectations for future price increases in the South East over the next three months.

Chairman of RICS South East, David Tuffin, said: “Conditions are ripe for a healthy start to the year. Many properties that sat on the market for months last year have finally been sold as buyers had less choice available.

“With a reported increase in the number of valuations taking place in the run up to Christmas, everyone seems confident more property will come on to the market now. However, for the short-term at least, intense competition is likely to remain.

“The prospect of higher interest rates may deter some buyers from looking, but this should be balanced by noticeable improvements in the economic climate.”

RICS believes the housing market bubble will not burst in 2004 and prices will continue to rise, although by only half as much as in 2003. It forecasts a six percent increase in house prices in 2004, based on the Government’s new monthly house price index. This figure is half the 11 per cent rise expected for 2003.