UK Housing Market Slows Amid Rising Mortgage Costs and Geopolitical Uncertainty

The Royal Institution of Chartered Surveyors (RICS) released a report on the UK housing market for March, indicating a slowdown in activity. A net 39 percent of surveyed professionals reported a drop in new buyer inquiries, an increase from 29 percent in February. This figure represents the weakest reading since August 2023.

Agreed sales also declined, with 34 percent of professionals reporting a drop, up from 13 percent the previous month. The report attributes the slowdown to rising borrowing costs and geopolitical uncertainty. These factors have reduced buyer confidence and affected longer-term house price expectations.

Looking ahead, 33 percent of professionals expect sales to weaken further over the next three months.

Over the next 12 months, only 1 percent anticipate weakening, suggesting a broadly flat market. In March, a balance of 23 percent of professionals observed falling house prices, with 43 percent expecting falls in the next three months and only 2 percent expecting increases over the next year.

Regionally, London, East Anglia, the South East, and the South West recorded weaker price readings than the national average.

In contrast, Scotland and Northern Ireland reported rising prices. New instructions to sell remained subdued, and unsold stock on estate agents' books increased to an average of 47 properties, up from 45 at the start of the year.

the lettings market, tenant demand rose while landlord instructions decreased, creating a mismatch between supply and demand.

Tarrant Parsons, RICS head of market research and analysis, commented on the shift in market conditions.

“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.”

On Wednesday, Moneyfacts reported that mortgage rates are likely to remain elevated despite some easing of upward pressure. The site noted that global stock markets have recovered following a two-week ceasefire agreement between the US and Iran. Moneyfacts indicated that calming markets could stabilize the mortgage sector.

Adam French, head of consumer finance at Moneyfacts, stated that sustained ceasefire and market stability could lead to lower rates, though sharp falls are unlikely in the near term. Jinesh Vohra, chief executive of mortgage app Sprive, suggested strategies such as regular overpayments to manage mortgage costs.

The report highlights ongoing inflationary concerns and the uncertain geopolitical environment as key influences on the market.