Too few properties coming onto the market and more stringent lending conditions appear to be stemming the tide of prospective home buyers, according to the latest RICS Residential Market Survey.

The national supply of new homes coming onto the market declined for the fifth consecutive month in May and in London, where fears of an overheating market have been expressed, demand for new homes fell for the first time since June 2012.

In the month that saw UK house prices reach record levels (£186,512) and greater lending restrictions begin to impact the market, respondents reported that banks are lending less, with the average Loan to Value (LTV) ratios among first time buyers dropping to 85.3% (from 86% in April). Meanwhile, respondents’ expectations for house prices over the next 12 months dropped from 3.9% to 3.6% - the lowest since December 2013.

The tightening in lending conditions facing some parts of the housing market even led to a modest pick-up in demand in the rental sector and rent prices are now projected to grow at around 2.5% over the next twelve months, and at an average annual rate of 4% over the next five years.