By Daniel Hunter

House prices in the UK will see an increase of 2% over the course of next year while the cost of renting a home should rise by around 4%, according to the Royal Institution of Chartered Surveyors.

Although challenging times are still ahead for the nation’s economy, 2013 may see some slight improvements and this will be reflected in the housing market.

In addition to rising prices, the number of transactions will also see a further increase, moving up just over 3% to 960,000 (from 930,000 in 2012). Although this represents an improvement, to put this in context, total sales in 2006 were well above this amount at 1.67 million.

In London, the prime central market is likely to be broadly stable following the tax changes announced earlier in the year but much of the rest of the capital will continue to see above average increases. Elsewhere, the South East and the North West should also see modest rises. The rest of the country will either see prices dip slightly or remain flat.

Meanwhile, with estimates stating that up to a quarter of loans taken out at the height of the market (2007) now being in negative equity, the recent trend in repossessions looks set to continue. However, with the number of possession claims and mortgages currently more than three months in arrears falling, the number of repossessions should dip below 35,000 for the first time since 2007.

2013 UK housing market at a glance:

- House prices to increase 2%
- Cost of renting to grow 4%
- Transactions to modestly increase to 960,000
- Repossessions to drop to below 35,000
- Housing starts to edge up towards 115,000 in England

"The average house price in the UK looks set to rise by a further two percent next year, despite the uncertain outlook for the economy," Simon Rubinsohn, RICS Chief Economist, said.

"More positively, the amount of sales going through should also see an increase across the country, climbing to its best level since 2007, as the Funding for Lending scheme helps boost the availability of mortgage finance.

"But these tentative signs of recovery in the sales market should not blind us to the very real problems that still exist. Even with the Funding for Lending scheme and some other government policies beginning to be felt in the mortgage market, many first-time buyers will continue to find it difficult to secure a sufficiently large loan to take an initial step on the housing market.

"Meanwhile, the alternative of renting is becoming more and more costly with a further increase in rents likely in 2013. Critically, the government needs to ensure that the conditions are in place that will enable the stock of new housing, whether for purchase or rent, to rise more rapidly."

Join us on
Follow @freshbusiness