Rising prices are most widespread in London, Rics said

House prices are likely to keep on rising for the time being, says the Royal Institution of Chartered Surveyors (Rics).

Its latest monthly survey shows that sellers are now beginning to return to the property market.

But they are still being outweighed by the number of potential buyers registered with estate agents.

A separate government property survey said house prices had risen by 6% between May and September.

The Department for Communities and Local Government (DCLG) also said UK house prices rose by 1.2% in September.

Although prices are still 4.1% lower than a year ago, this was the fourth monthly increase in a row and put the average house price at £199,303 across the country.

Property shortage

The Rics survey found that in October, the balance of surveyors reporting price rises rather than falls rose to 34%, up from 20% in September.

The comparative shortage of supply is continuing to promote buyer competition Keith Barnfield, Barnfields estate agency

Rics said this was the strongest survey result in favour of rising prices since December 2006.

"Although the supply of property is beginning to pick-up, it is still insufficient to keep pace with the increase in demand which points to further prices gains in the near term," said Jeremy Leaf of Rics.

"Cheap money remains a critical prop for the market and this is being reflected in the continuing appetite for finance from first-time buyers despite the large deposits still being demanded by lenders," he added.

Commentators have explained this by pointing to a dearth of people putting their homes up for sale, even though the number of potential buyers has been restricted since 2007 by the continuing rationing of available mortgages because of the continuing effects of the international credit crunch.

"Transaction numbers are back up to 2006 levels - the comparative shortage of supply is continuing to promote buyer competition," said Keith Barnfield of Barnfields in Enfield.

Richard Evans of Colleys surveyors in Exeter said: "Competition amongst buyers for a small supply of properties for sale is continuing to drive asking prices and values up."

More sales

The Rics survey said London was leading the way in terms of price rises, with a balance of 95% of estate agents in the capital reporting that prices were going up rather than down.

That was the strongest survey result for London since December 1996.

The balance of those surveyors across the UK reporting an increase in instructions from would-be sellers has risen from just 5% in September to 15% in October.

Rics said this upward trend in sales instructions had occurred in all regions, particularly in the north of England, the South West and in London.

Completed sales have continued to rise slowly to an average of 19 per surveyor over the past three months - although that still amounts to just under three sales every two weeks.

"The most recent survey provided further evidence that activity levels also continue to improve, albeit at a slightly slower pace than in previous months [but] a shortage of supply still seems to be limiting activity in the housing market," said Rics.

Catherine Penman, of property consultancy Carter Jonas, said: "The September DCLG figures are further proof of the ongoing recovery in the residential property market, which is virtually unrecognisable from a year ago."

"Low interest rates, attractive prices and more encouraging news from the economy are driving transactions," she added.