The UK housing market has shown signs of slowing as uncertainty from the ongoing conflict in the Middle East weighs on buyer confidence. According to the latest Residential Market Survey from the Royal Institution of Chartered Surveyors (RICS), published in February, the market is “still struggling for momentum,” with geopolitical and macroeconomic pressures dampening sentiment among prospective buyers and affecting short-term expectations.
The survey coincides with comments from UK Chancellor Rachel Reeves, who highlighted that it is too early for significant energy relief measures as the Middle East situation continues to unfold, potentially putting further strain on household finances.
Falling Buyer Enquiries and Sales
RICS data indicates that new buyer enquiries declined further in February, with a headline net balance of -26%, down from -15% in January. Similarly, agreed sales fell, with a net balance of -12%, compared with -9% in the previous month. In terms of near-term expectations, only a small net balance of 2% anticipated a drop in sales activity, marking the softest reading since November last year. However, the survey revealed that the longer-term outlook remains relatively positive, with a net balance of 17% expecting sales to rise over the next 12 months.
On house prices, the survey showed a net balance of 12% reporting decreases, which RICS described as “broadly flat to marginally negative.” Regionally, London (-40%), the South East (-24%) and East Anglia (-26%) saw the greatest downward pressure, while Northern Ireland, Scotland, and the North West continued to report firmer price trends, reflecting a mixed regional picture.
Surveyors’ Expectations for the Coming Year
While surveyors expressed caution in the short term—with a net balance of 18% anticipating near-term price falls, up from 6% in January—the longer-term outlook was more encouraging. Around 33% of respondents expected prices to edge higher over the next year, albeit at a slower pace than previously projected. In London, optimism was limited, with only 7% of respondents expecting house prices to rise over the next 12 months, down significantly from earlier projections of 56%.
On the supply side, RICS noted that the level of new property instructions remained broadly stable, suggesting that fresh listings were neither increasing nor decreasing significantly at the headline level.
Rental Market Trends
The lettings sector also reflected a delicate balance. Tenant demand remained broadly stable over the three months to February, but landlord instructions were firmly negative, pointing to a continued shortage of rental properties. Consequently, 20% of survey participants expected rents to increase over the next three months, reflecting the ongoing challenges in the private rental sector.
Insights from Scotland
In Scotland, surveyors reported similar trends. A net balance of -8% cited a fall in new buyer enquiries during February, down from 18% in January. Supply showed a modest rise, with 8% of respondents noting an increase in instructions to sell, compared with 27% in January. Agreed sales also improved slightly, with 7% of surveyors reporting a rise—the second consecutive month of positive figures.
Scottish surveyors were cautiously optimistic for the near term. A net balance of 39% expected sales to rise over the next three months, while 24% anticipated house prices would continue to increase. Marion Currie, a RICS-registered valuer at Galbraith in Dumfries and Galloway, said: “Activity has picked up as February progressed, with agreed sales gaining momentum and fresh stock coming through. This provides a positive outlook as we head into the new financial year.”
Geopolitical and Economic Pressures
Across the UK, RICS head of market research Tarrant Parsons noted that February’s survey reflected heightened volatility. “While early-year indicators suggested modest improvements, geopolitical tensions and rising oil and energy prices have clearly affected confidence,” Parsons explained. He added that these factors are likely to keep mortgage rates elevated for longer, softening near-term expectations. Maintaining a positive trajectory over the next 12 months, Parsons noted, will depend on whether recent inflationary pressures ease.
Overall, the RICS survey paints a picture of a UK housing market facing short-term headwinds from global instability and inflationary pressures. While buyer demand has softened and some regions see downward price pressures, the longer-term outlook for sales and prices remains cautiously optimistic, provided inflation and geopolitical uncertainties stabilise.
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