A shortage of supply in the North West’s sales and letting sectors presents a “huge challenge” for the housing market, according to a new report.

The latest RICS Residential Market Survey, which was conducted ahead of the government’s recent housing announcements, also revealed that new landlord instructions failed to improve for the third consecutive month in January.

Respondents to the Royal Institution of Chartered Surveyors survey predicted the issue could worsen over the medium term and indicated that they expect landlords to decrease the size of their portfolios in the next three years.

Changes to stamp duty in April alongside scheduled cuts to mortgage interest tax relief have been highlighted as important factors affecting the attractiveness of buy-to-let as an investment.

Almost 30% more respondents felt that landlords were likely to decrease (rather than increase) the size of their portfolio over the next twelve months.

Meanwhile, new instructions (homes coming on to the market), having remained flat for the past few months, deteriorated further in January with 57% of respondents seeing a fall in new instructions last month.

Simon Rubinsohn, RICS chief economist (pictured), says: “Pointing to further increases over the course of this year, the medium term view of RICS professionals is that both house prices and rents will over the medium term continue to grow at a faster pace than wages, putting even greater pressure on affordability.

“Whether the measures announced can ease this this trend remains to be seen.”

Derek Coates from Liverpool estate agent Venmore adds: “January for us was very busy with regard to sales enquiries and actual sales agreed.

“However, there is a lack of properties coming on to the market which must, eventually, lead to price inflation.”