Near-term confidence fades even as longer-term outlook holds up
The UK housing market showed little sign of building momentum in February, as geopolitical tensions and wider economic uncertainty weighed on confidence, according to the latest UK Residential Market Survey by the Royal Institution of Chartered Surveyors (RICS).
Respondents reported a further deterioration in new buyer enquiries. The survey’s headline net balance for enquiries fell to -26% in February from -15% in January. Sales activity also remained muted, with agreed sales at a net balance of -12%. Expectations for sales over the next three months slipped to -2%, although the 12-month view stayed positive, with a net balance of +17% still forecasting higher transaction levels over the coming year.
Price signals were broadly steady at a national level but remained uneven across the country. The national house price net balance registered -12% in February, slightly weaker than the previous month. RICS said the sharpest downward readings continued to come from London (-40%), the South East (-24%) and East Anglia (-26%). Northern Ireland, Scotland and the North West of England were among the areas where respondents continued to report firmer conditions.
Near-term price expectations also turned more cautious. The balance for the next three months fell to -18% from -6% in January. Over a 12-month horizon, sentiment remained positive overall at +33%, though this too moderated. London’s 12-month expectations cooled markedly, dropping to +7% from +56%.
On supply, the market appeared stable rather than expanding. New instructions posted a net balance of +2%, implying little change in the flow of new listings. Appraisals were also described as largely unchanged, suggesting no immediate shift in the pipeline.
“February’s survey highlights renewed volatility in the market,” said Tarrant Parsons (pictured right), head of market research and analytics at RICS. “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.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman, however, pointed out that even before the geopolitical tensions, the market was clearly in a cautious state.
“Confidence has definitely improved this year compared with the end of last but remains relatively fragile and won’t be helped by worries that inflation and interest rates may not have peaked after all, as was expected only a few weeks ago,” Leaf said.
“On the ground, we have seen no sharp reactions one way or the other with all sales agreed proceeding other than for non-property related market reasons.”
In the lettings market, tenant demand was broadly flat over the three months to February, with a net balance of +2%. However, the supply of rental homes remained constrained: landlord instructions stayed negative at -27%. Against that backdrop, a net balance of +20% of respondents expected rents to rise over the next three months.
“Now that the Renters’ Rights Act is almost upon us, many landlords are trying to sell when tenancies end or come up for renewal,” Leaf said. “This has resulted in lack of choice for tenants, thus keeping rents at a higher level than might have been expected due to continuing cost-of-living concerns.
“However, turmoil in the Middle East may make some tenants think twice before committing themselves until the picture is clearer.”
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