UK Housing Market Cools Down Amid Rising Mortgage Rates

The UK housing market is showing signs of slowing down, according to the latest survey by the Royal Institution of Chartered Surveyors (RICS). The survey reveals a slight dip in buyer demand, following a recent increase in mortgage rates.

Despite this, respondents remain optimistic about the market, expecting an increase in sales activity over the coming year.

Image: UK Housing Market

The survey’s key indicator for new buyer enquiries fell to a net balance of -1 in April, marking an end to three months of consecutive growth. This decline is particularly evident in London and the southern parts of England.

On the other hand, property listings have seen a notable improvement, with a net balance of +23 respondents observing an increase in new instructions. This suggests that sellers are growing more confident in the market conditions post-pandemic.

“Feedback to the latest RICS survey demonstrates the sensitivity of the sales market to interest rates at the present time, given the continuing challenge around affordability,” said Simon Rubinsohn, RICS chief economist.

The agreed sales indicator edged up slightly, with a net balance of +5, the most positive since May 2021. However, changes in financial markets and tempered expectations for the Bank of England’s monetary policy loosening this year have dimmed the short-term sales outlook.

Mortgage Rates

The net balance for three-month sales expectations fell to -1, indicating a stagnant near-term forecast. Despite this, there is optimism for a stronger trend in sales activity over the next year, although expectations have moderated to a net balance of +33, down from +46 in the previous month.

In the lettings market, the survey revealed a continuing slowdown in tenant demand and a shortage of landlord instructions, which recorded a net balance of -13, underscoring a weakened market outlook. Rental growth expectations also hit a three-year low, with a net balance of +33 anticipating increases.

“As far as the lettings market is concerned, an increasing number of respondents are also drawing attention to affordability constraints, and this is reflected in a more modest pace of rental growth,” Rubinsohn said.

Lettings Market

The fundamental problem in the market across much of the country remains the imbalance between demand and supply, with new instructions continuing to decline.

UK Housing