House prices rose at their fastest pace in over two years in the three months to August, a survey showed on Thursday, indicating last month's interest rate rise has done little to cool the market.
Enquiries from buyers, meanwhile, rose at their fastest pace in almost three years, indicating further strength could yet be to come.
The Royal Institution of Chartered Surveyors said its house prices balance rose to +35 from +30 in the three months to July, the highest since May 2004 when house price inflation was in double digits and the price balance hit +41.
RICS said that strong economic growth and a strengthening employment picture were supporting buyers' confidence but it warned that a further rise in interest rates could dampen activity going forward.
Would be buyers have been encouraged by a strong economic performance, but additional rises in interest rates before the end of the year could deter buyers as more pressure builds on personal finances, RICS spokesman Ian Perry said.
The Bank of England surprised markets with a quarter point rise in interest rates last month to 4.75 percent. It held borrowing costs steady this month but is widely tipped to raise rates again before the end of the year.
RICS said the prospect of further monetary tightening had dampened surveyors' confidence a touch in the short term but the mood remained upbeat.
Expectations for price rises over the next three months remained close to this year's high point and are well above year ago levels.
Moreover, new buyer enquiries rose for the fifteenth consecutive month in August, up at its fastest pace since September 2003.
Price rises are being driven by a combination of would be buyers entering the market and a standstill in new property supply, the report said. August's surprise interest rate hike has had little impact on the housing market according to chartered surveyors.
Prices rises were led by Scotland, which rose at the fastest pace in two years. This was followed by London and the South East where booming City bonuses have added to the market's buoyancy.
Nevertheless, the sales to stock ratio, regarded by many economist as a better guide to the health of the housing market than prices, eased slightly to 37.1 percent in August from 37.5 percent in July. This was the first fall in more than a year.