property market slowing amidst economic uncertainty and Stamp Duty rise

The UK housing market showed further signs of strain in April, with another drop in buyer enquiries and agreed sales and ongoing economic uncertainty weighing on confidence, says Simon Rubinsohn (pictured), RICS Chief Economist.

In its latest survey, RICS reports new buyer interest declined for the third consecutive month, reporting a net balance of -33%, indicating a fall in enquiries. This reflects growing caution from prospective buyers alongside affordability pressures and tight borrowing conditions.

The main reason for the dip in the key RICS sales activity metrics lies in the expiry of the stamp duty holiday.”

Sales activity also continued to soften. A net balance of –31% of survey participants reported a decline in agreed sales over the month, the weakest figure recorded since mid-2023 (-42% August 2023), pointing to a subdued spring market.

Rubinsohn says: “Although geopolitical developments haven’t helped the mood music in the residential market over the past month, the main reason for the dip in the key RICS sales activity metrics lies in the expiry of the Stamp Duty holiday at the end of March.

“Near-term expectations indicators suggest the subdued trend will persist for the next few months at least but looking beyond this, the results are more encouraging reflecting in part the prospect of deeper interest rate cuts than previously anticipated.

Negative rental market

“More problematic, however, is the negative feedback in the survey around supply in the rental market. With demand continuing to grow, there appears little relief in store for tenants in terms of the upward pressure on rents. Critically, even with the rise in the build to rent to sector, the shorfall of affordable rental stock looks set to remain substantial”.

Short-term expectations, says RICS, remain modest, with a net balance of –15% anticipating a further dip in sales over the next three months. Despite this, there are signs of improvement on the horizon. A net balance of +17% of respondents expects sales to rise over the year ahead, up from +11% in March, suggesting that longer-term sentiment remains more positive.

House prices held steady in April, slipping slightly into negative territory at –3% from +2% previously. Short-term price expectations remain cautious, with a net balance of –21% of respondents anticipating some downward pressure over the next three months, although a net balance of +39% of survey participants expect prices to return to growth in the year ahead.

Flat supply

The report also reveals that, on the supply side, new instructions to sell remained flat at a net balance of +6% for the second month in a row. Similarly, the flow of property appraisals only rose marginally suggesting no meaningful change in supply conditions in the near term.

In the lettings market, tenant demand has increased in the three months to April according to a net balance of +14% of respondents. RICS says this represents a slightly stronger demand trend compared to the mostly flat picture seen in the previous quarter (net balance was +3% in the three months to January).

Alongside this, it adds, there has been a clear decline in new landlord instructions, with the latest net balance of –26%, down from –19%. Looking ahead, the near-term rent expectations net balance of +25% suggests further rental price rises over the next three months.

RICS also notes that many respondents have commented on how Trump’s tariff announcements have reduced confidence, although, at the same time, some are pleased with the general level of resilience the market is displaying in an uncertain global climate.

Jeremy Leaf, north London estate agent and a former RICS residential chairman, says; “Unfortunately, not even the arrival of better weather and the prospect of lower mortgage rates could shake the traditionally busier spring housing market out of its lethargy.

“Too many available flats has meant only demand for houses has held up well in recent weeks – and more than we dared to expect. There’s no doubt the end of the Stamp Duty holiday in March brought forward many moving decisions.

“As a result, prices are softening as most buyers and sellers are not withdrawing but preferring to find middle ground if possible, despite continuing worries about economic prospects and pace of interest rate falls.”

We have noticed considerably more tenant interest but a resistance to paying higher rents.”

On Lettings Leaf says: “Over the past month or so, we have noticed considerably more tenant interest but a resistance to paying higher rents. However, lack of supply, particularly of one and two-bedroom flats in more popular areas, often prompted by landlords deciding not to renew, is preventing a more marked downturn in values.

“Looking forward, we do not expect much improvement in stock shortages, particularly as the Renters’ Rights Bill nears the statute book so the imbalance with demand is likely to continue.’

Tomer Aboody, director of specialist lender MT Finance, says: “We’ve been hearing and seeing the volatility linked to the October Reeves Budget, where she declined to extend the Stamp Duty concession and announced multiple other changes to national insurance, taxes, etc. The end of the stamp duty holiday in March saw a big push in transactions completing by the end of the month so that buyers could avoid the tax increase.

Buyers and sellers waiting

“We are now seeing the fallout, with transactions and mortgage approvals falling, as buyers and sellers wait to see whether the anticipated interest rate cut comes. If it does, in turn, this will hopefully encourage banks to reduce their mortgage rates, allowing affordability to ease and encouraging market activity.”