The UK housing market continues to experience significant challenges following a recent increase in stamp duty, with the latest survey by the Royal Institution of Chartered Surveyors (RICS) indicating that sellers currently outnumber buyers. This shift has resulted in a notable decline in new buyer inquiries for the month of May, reflecting ongoing volatility in the real estate sector. Despite these obstacles, RICS reports that the sentiment around the near-term outlook is beginning to show tentative signs of improvement, leading some experts to suggest that this downturn may be stabilizing.
In contrast to RICS’s findings, property portal Zoopla observed a different trend in May, indicating the highest volume of property sales agreed in four years. However, they noted that sellers are having to adjust their expectations, as properties are selling for an average reduction of £16,000 from initial asking prices. RICS attributes the slowdown in buyer activity primarily to the recent changes in stamp duty, which they believe are dissuading potential buyers from entering the market, compounded by global uncertainties regarding trade policies and interest rates.
Simon Rubinsohn, RICS’s chief economist, expressed a cautious optimism regarding newly announced housing measures as part of the government’s Spending Review. He believes that the commitment to a long-term affordable housing strategy could enhance supply, foster economic stability, and lead to the emergence of a better-functioning property market.
The current performance metrics for the UK housing sector illustrate a bleak landscape. According to RICS data, buyer demand and sales activity remain in negative territory, with a net balance of -26% of survey participants reporting a reduction in new buyer inquiries in May. This development marks a troubling fifth consecutive month of decline in buyer interest, although the latest figure shows a slight improvement from earlier months. Similarly, agreed sales are falling, reported at a net balance of -28%.
On the supply side, however, the situation appears somewhat more positive. A net balance of +7% of RICS respondents reported an increase in new listings, marking the 11th continuous month of growth. Additionally, a rise in valuation activity was reported, with +19% noting an uptick in appraisals compared to the previous year. This suggests the potential for a more active summer market, which could invigorate sales activity.
Senior economist Tarrant Parsons of RICS pointed out that overall sentiment in the residential property market remains subdued due to the ongoing uncertainties in global trade and the dampening effects of transactions being accelerated ahead of the recent tax changes. Nonetheless, there are signs that sales expectations are stabilizing, which, while not indicating an immediate turnaround, suggests that a further deterioration in market conditions is unlikely. Looking ahead, a quarter of RICS respondents expect an increase in sales volumes over the upcoming year, the strongest forecast since February, reflecting a cautious optimism about eventual recovery.
In terms of house price dynamics, RICS’s findings indicated that the national net balance edged down to -8% in May from -3% the previous month, still indicating a flat market overall. Despite this stagnation, there are expectations of a modest rise in house prices over the next year, with a net balance of +34% of respondents anticipating increases. The latest house price index released by Halifax corroborates this mixed picture, revealing a 0.4% decline in UK house prices for May, translating to a reduction of approximately £1,150, with the average property costing £296,648.
Furthermore, forecasts from Capital Economics project that house prices will increase by 3.5% by the end of 2025. However, economist Alex Kerr provided a note of caution, asserting that recent weakness in house prices likely reflects deeper issues beyond the attributable effects of the stamp duty hike. Kerr emphasizes that the downward trend in house prices observed over the last several months should not be dismissed as merely a short-term adjustment due to tax alterations.
Current mortgage approval figures suggest a significant rebound in housing transactions may not be imminent, indicating a potential delay in regaining pre-pandemic activity levels. This insight aligns with a broader sentiment that the recovery process may extend longer than previously anticipated, particularly if housing demand does not see a decisive uptick in the coming months.
Tom Bill, head of UK residential research at Knight Frank, echoed these concerns, noting that the diminished buyer interest could force sellers to revise their pricing strategies. This could be particularly critical for those looking to transact before the upcoming Autumn Budget, which could introduce additional uncertainties into the market. In a similar vein, Jeremy Leaf, a north London estate agent and former chairman of RICS, observed that while current transactions generally remain intact, they are taking longer to finalize. Buyers appear to be exercising greater control, carefully negotiating and choosing from a wider selection of properties that have entered the market.
In summary, while the UK housing market contends with immediate challenges arising from tax changes and broader economic uncertainties, there are emerging indications that conditions may begin to stabilize in the near future. Enhanced supply measures and a cautious optimism about eventual recovery may pave the way for a more robust market environment, contingent on the resolution of current economic headwinds. As the landscape continues to evolve, stakeholders across the real estate sector remain watchful for signs of significant change.