The shortage of homes for sale began to ease during February as more properties were put on the market, research shows today.

The Royal Institution of Chartered Surveyors said the number of people selling their home rose quicker than the number of potential new buyers entering the market for the second consecutive month during February.

The shortage of properties on the market has been cited as a key factor supporting house price rises last year (see the Free House Price Valuation guide).

The group said both new instructions to sell and new buyer inquiries rebounded during February after being depressed in January due to the bad weather and the end of the Government's stamp duty holiday.

Overall, 7% more chartered surveyors reported a rise rather than a fall in new buyer inquiries, while 15% more saw an increase in new instructions to sell property, reversing a balance of 5% more who saw a fall in homes being put up for sale in January.

A balance of 17% of surveyors also said they had seen house price increases during the month, although this was down from 31% more in January.

House price falls

The drop is in line with figures reported by Nationwide and Halifax for February, which both showed house price falls, following the sharp drop in activity during January.

However, it remains to be seen whether the price drops are the result of one-off factors during January or the start of a new trend.

RICS spokesman Jeremy Leaf says: "Most market indicators are still positive and consistent with further house price increases.

"However, the magnitude of the gains going forward is likely to continue to ease reflecting the fact new supply coming onto the market is starting to outstrip fresh demand."

Going forward, more surveyors still expect house prices to rise than to fall, but the balance of 7% was at its lowest level since July last year, and well down on the previous month's figure of 21%.

The number of sales agreed during the three months to the end of February fell to 17.6, but surveyors expect sales levels to pick up again, attributing the drop to the recent bad weather.

The group said the housing market remained strong in London and the South East, but more surveyors in the North, Yorkshire and Humberside, Wales and the West Midlands all reported house price falls than those who reported rises during the month.

Mortgage costs down

Meanwhile, the interest charged on two-year fixed rate mortgages fell to a six-and-a-half-year low during February in a further sign that competition is returning to the market.

The average cost of a two-year loan dropped to 3.88% during the month, down from 3.97% in January, to stand at its lowest level since July 2003, according to the Bank of England.

Further reading/Key links

Valuation loophole: Free house price valuation
Cut home loan debt: Cheap Mortgage Finding
Latest house prices: Nationwide, Land Registry, Halifax