House prices will finish the coming year one or two percent higher than at the end of 2009, says RICS UK Housing Market Forecast, adding that transactions are likely to rise to a monthly average of 70,000 from 55,000 to 60,000 currently.

The optimistic note said that supply should continue to increase in the early part of 2010 but will struggle to keep pace with demand providing a platform for further house price rises.

Significantly, the inventory of stocks on surveyor’s books still remains close to historical lows. However, the narrowing in the gap between supply and demand will gradually begin to exert a greater influence on the market.

The on-going caution of lenders, the uncertain economic climate and a flat labour market are all also likely to present challenges resulting in prices finishing the year only one or two percent higher than they started it.

However, with more property coming onto the market it is likely the number of completed sales will increase. RICS estimates that the average volume of transactions will rise from between 55,000 and 60,000 to 70,000 by the end of the year.

Simon Rubinsohn, RICS chief economist commented: “The imbalance between supply and demand will continue into the early part of the new year resulting in some further house price gains.

However, the combination of more available property and the beginning of the exit strategy from the big stimulus programmes that have helped support the economy will gradually exert a greater influence.

Transactions levels are likely to increase, fulfilling the Christmas wish list of many agents throughout the country but first time buyers are likely to continue to struggle to procure finance from lenders without the help of generous relatives.”