The UK residential market has shown signs of slowing as heightened geopolitical uncertainty, linked to the ongoing Middle East conflict, weighs on buyer sentiment and transactional activity.
According to a UK residential survey conducted by RICS in March, demand from prospective buyers weakened notably over the month.
New buyer enquiries fell to a net balance of -39%, down from -29% in February, marking the weakest reading since August 2023. Agreed sales followed a similar trajectory, dropping to a net balance of -34% from -13% the previous month.
Data from the survey pointed to a market increasingly pressured by inflationary concerns and higher mortgage costs.
Short-term sales expectations also fell sharply to -33%, compared with -4% in February, suggesting that respondents expected activity to weaken further over the coming months.
The 12-month outlook softened, with sales expectations slipping to -1%, indicating a broadly flat market rather than the modest recovery view seen previously.
Additionally, headline price balance fell to -23% in March, down from -14% and -10% in the prior two months, signalling broader downward pressure on values.
Expectations for the next three months weakened markedly to -43%, while the 12-month outlook edged down to +2%, pointing to little overall price growth over the year ahead.
Regional disparities remain evident as London, East Anglia, the South East and the South West posted weaker price readings than the national average. In contrast, Scotland and Northern Ireland continued to report rising prices.
Meanwhile, on the supply side, new instructions remained subdued at -6%, and unsold stock on estate agents’ books rose to an average of 47 properties, up from around 45 at the start of the year.
Finally, the lettings market remained more resilient but continued to reflect an imbalance between demand and supply. Tenant demand rose to a net balance of +10% in March, while landlord instructions stayed firmly negative at -25%.
Respondents expected the imbalance to keep pushing rents higher, with near-term rental expectations rising to +29%.
Tarrant Parsons, RICS head of market research and analysis, said: “The mood across the UK housing market has shifted markedly over the past couple of months. What had been a cautiously improving picture for activity has been knocked off course by the wider macro fallout from the Middle East conflict, as the renewed deterioration in the mortgage rate outlook has proved particularly challenging.
“Indeed, with average fixed rates climbing back above 5%, according to some sources, it is unsurprising that buyer demand has softened. The path ahead hinges on whether or not recent surges in oil and energy costs begin to reverse in what remains a highly uncertain geopolitical environment.”
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