House prices in London could go up by as much as 11 per cent next year, according to the Royal Institution of Chartered Surveyors (RICS).

The cost of renting a home will also rise by two per cent due to an 'acute imbalance between buyer demand and sluggish supply' with new instructions to estate agents close to stagnating.

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.

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 twelve months.”

In addition to rising prices, the number of transactions should also see a further increase, moving up to 1.2m (from 1.05m in 2013). Although this represents an improvement, to put this in context, total sales in 2006 were well above this at 1.67m.

Across the UK, all parts of the country should see prices rise next year. With London seeing the highest rises, the North East and Northern Ireland will experience the lowest rises with prices increasing by five percent and four per cent respectively.