WEST Midlands house prices will see an increase of seven per cent over the course of next year while the cost of renting a home should rise by a further two per cent, according to the RICS (Royal Institution of Chartered Surveyors).

The growth is being driven by an "acute imbalance" between burgeoning buyer demand and sluggish supply, with new instructions to estate agents close to "stagnating", says the RICS.

Although significant challenges remain to achieving a sustainable economic recovery, it added, 2014 might see the nascent pick-up in activity gather pace. That would be reflected in the housing market. In addition to rising prices, the number of transactions should also see a further increase, moving up to 1.2 million (from 1.05 million in 2013).

Although that represents an improvement, to put it in context, total sales in 2006 were well above that, at 1.67 million.

With the shortage of homes coming on to the market a key factor behind the price rises, some comfort might be drawn from a likely 20 per cent jump in new starts in England over the next year. That would push the total towards the 155,000 mark, compared to 125,000 this year and only around 100,000 in 2012.

While that is an encouraging trend, it is said to be "still insufficient" to address the more rapid growth in population and will leave "significant shortfalls" in all tenures.

Across the UK, all parts of the country should see prices rise next year. Predictably, the biggest increases are to be seen in the capital, where the cost of a home will jump by around 11 per cent. It remains to be seen what impact the recently announced increase in capital gains tax for overseas vendors will have on the prime central London market.

Meanwhile, the North East and Northern Ireland will experience the lowest rises, with prices increasing by five per cent and four per cent respectively.

Peter Bolton King, RICS global residential director, said: “The cost of a house is now picking up right across the country and next year should see more of the same.

"We expect all areas of the country to see prices increase, with London, predictably, recording the biggest rises. The improving economic picture aside, this is largely down to the fact that buyer numbers considerably outweigh the amount of homes on the market.

"While the number of new homes being built is now on the rise, it still won’t be anywhere near enough to meet demand and we expect the problem of insufficient housing stock to be the main driver behind price increases over the next 12 months.”