UK Housing Market Loses Momentum Amid Global Uncertainty, Surveyors Report
The UK housing market is struggling to gain momentum as global and economic uncertainties continue to weigh heavily on home buyer sentiment, according to the latest report from the Royal Institution of Chartered Surveyors (Rics). While some surveyors reported a more encouraging start to the year, confidence has weakened significantly as concerns over inflation, interest rates, and global instability have intensified.
Decline in Buyer Inquiries and Agreed Sales
New buyer inquiries weakened further in February, with a net balance of 26% of property professionals reporting falls in inquiries rather than rises. This represents a deterioration from January, when a balance of 15% reported such declines. Agreed sales also remained subdued, with a net balance of 12% of professionals reporting falls in completed transactions.
Overall, property professionals expect sales to decline in the near term. However, the longer-term outlook remains more resilient, with a net balance of 17% anticipating a pickup in sales activity over the next 12 months.
Regional Variations in House Prices
House prices were broadly flat overall in February, with a net balance of 12% of professionals reporting falls. However, there were significant regional variations. Downward price pressure is particularly strong in London, the South East, and East Anglia. In contrast, Northern Ireland, Scotland, and the North West of England are still reporting firmer price trends.
Looking ahead, surveyors have become more cautious about house prices in the near term. Yet, over the next 12 months, a net balance of 33% of professionals expect prices to edge higher. Notably, in London, expectations for house prices in the coming year have cooled sharply, according to the report.
Supply and Rental Market Dynamics
On the supply side, new instructions to sell remained broadly stable in February, indicating little immediate shift in the pipeline of new stock coming onto the market.
In the lettings market, tenant demand was broadly stable over the three months to February. However, landlord instructions were firmly negative, pointing to a shortage of rental homes. Professionals are expecting rents to rise overall in the next three months.
Mortgage Market Turbulence
Mortgage lenders have been withdrawing deals and increasing their rates as swap rates have risen, with concerns about escalating prices mounting amid the conflict in the Middle East. Financial information website Moneyfactscompare.co.uk noted that recent days have been some of the most turbulent in the UK mortgage market since the aftermath of the September 2022 mini-budget.
Some average mortgage rates on the market have also flown past the 5% mark as lenders have scrambled to make adjustments.
Expert Analysis
Rics head of market research and analytics, Tarrant Parsons, commented: "February's survey highlights renewed volatility in the market. While activity indicators at the start of the year suggested a tentative improvement, the deterioration in the geopolitical backdrop has clearly weighed on confidence. The recent rise in oil and energy prices has also increased the likelihood that mortgage rates will remain higher for longer. As a result, near-term expectations have softened. Although the 12-month outlook remains positive overall, maintaining that trajectory will depend on the recent spike in inflationary pressures easing in the months ahead."
