Several factors of uncertainty reduced momentum in the UK’s housing market in February, according to the latest survey from the Royal Institution of Chartered Surveyors (RICS).
Buyer demand weakened, posting a net balance reading of -14% in February. This is down from -1% in January and marks the weakest result for the survey’s gauge of buyer demand since November 2023.
According to respondents, the oncoming changes to stamp duty arriving on April 1st, where the threshold will reduce from £250,000 to £125,000, is expected to weaken market activity, and it is believed that this is increasingly influencing the slowdown as deadline approaches. Further to this, geopolitical and international economic uncertainties contribute to a less favourable climate for the housing sector.
Despite these challenges, house prices at a national level continue to rise overall, albeit at a subdued rate. The latest net balance came for price growth came in at +11%, which remains consistent with a subtle upturn in prices. However, this series has now moderated in each of the last two months, easing from +25% and +21% in December and January, respectively.
Respondents note that that whilst the recent interest rate cut by the Bank of England was welcomed, there is an appetite for the bank to go further.
Looking to the future, whilst the market is expected to continue to soften in the short-term, most respondents believe that house prices will rise over the next twelve months. Indeed, the net balance for the year-ahead price expectations series sits at +47%, broadly in-line with the average reading posted over the past six months.
Simon Rubinson, RICS chief economist, said: “The UK housing market appears to be losing some momentum as the expiry of the temporary increase in stamp duty thresholds approaches. Some concerns are also being expressed by respondents about the re-emergence of inflationary pressures and the more uncertain geopolitical environment. That said, looking beyond the next few months, sales activity is seen as likely to resume an upward trend with prices also moving higher.
“A key support for the market continues to be the increased flow of existing stock becoming available, giving buyers a greater choice of options. However, leading indicators around new build remain subdued for now, highlighting the significance of the Planning and Infrastructure Bill introduced to Parliament this week."
Tomer Aboody, director of MT Finance, commented: "Although we have seen a confident market over the past 12 months as buyers make their move due to a better interest rate environment and lower inflation, both buyers and sellers have been used to much lower rates and are hoping for further cuts in coming months.
“While sales volumes are up, they are still well below historical figures and some intervention will be needed in order to inject more life into the market. Unfortunately, particularly given further difficulties ahead as the fallout from the recent Budget continues, any positive intervention doesn't seem to be on the immediate horizon."
