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UK house prices creep up as London demand slips

U.K. house prices continued to increase in May as supply remained tight, but tougher rules around lending and fears of an uncontrolled housing bubble have introduced a "level of caution" into the market – particularly London , new data shows.

The Royal Institution of Chartered Surveyors (RICS) net house price balance rose to +57 in May, outstripping economist estimates of a fall to +52 from +55 in April, with the increase put down to a decline in the number of properties for sale.

Read MoreAppeal of London property wanes for foreign buyers

George Clerk | E+ | Getty Images

While house prices crept up, the RICS survey showed inquiries from buyers fell as banks have tightened up their lending regulations and London saw the first fall in demand for new homes since June 2012.

Chief economist at RICS Simon Rubinsohn said the strong upward momentum was starting to come off the housing market as a "level of caution" has set in among buyers and sellers.

Read MoreUK Help to Buy backs $1.7B of mortgage loans

Surveyors' expectations of house price moves were also at their lowest since December last year.

The Bank of England has voiced concern over the volatility of the U.K.'s housing market and has come under fire over how and when they will raise interest rates while the U.K. economy continues to show increasing signs of strength. Minutes from the Bank's Monetary Policy Committee (MPC) showed members are starting to soften their stance on hiking interest rates.

Recent figures on the number of approvals for Help to Buy mortgage guarantees, a government initiative that helps buyers get on the property ladder with a small deposit, showed the scheme accounted for just 1.3 percent of all mortgage-backed property purchases in its first six months of the year.

Read More'Unsustainable' boom in UK property to cool by 2016

The scheme has been criticised for inflating the London housing bubble, but the figures, which show a lower number of mortgage approvals, have eased concerns.

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