Higher stamp duty bills and negative newsflow from the US have taken the spring out of the step of the UK property market, with house prices likely to stagnate over the next few months.
New buyer demand and agreed sales were both down in March according to the latest survey from the Royal Institution of Chartered Surveyors (RICS), as buyers ran out of time to complete a transaction before the 31 March stamp duty deadline.
New buyer demand slipped to a net balance score of -32%, down from -16% in February, marking the weakest sentiment since September 2023. Meanwhile, agreed sales slipped from -13% to -16%.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The RICS report is a sentiment survey, based on the views of surveyors and estate agents rather than primary transaction data. Net balance scores are calculated by subtracting negative responses from positive responses, and can range from -100 to +100.
Scores of -32% and -16% mean more agents reported a drop than a rise in March. Lower figures than in February suggests sentiment is weakening.
“The expiry of the stamp duty break was always going to lead to a pause in activity in the sales market. However, the latest results, and indeed the anecdotal remarks from respondents to the survey, suggest that the shift in sentiment has been aggravated by the slew of negative macro newsflow over the past few weeks,” said Simon Rubinsohn, chief economist at RICS.
“Looking forward, the impact on the market will in no small part depend on how the economy is affected by the emerging trade war and the response of the Bank of England to the shifting environment.”
Survey respondents believe these headwinds will impact house prices in the short term. A net balance of -26% of respondents believe prices will fall over the next three months, down from -16% in February.
Over a 12-month horizon, sentiment is more positive. A net balance of +39% of respondents think prices will rise over the next year. This is still lower than February’s reading of +47%.
How does this compare to other house price data?
The RICS survey looks at sentiment rather than transaction volumes and official house price data, however it echoes trends we are seeing elsewhere.
Annual house price growth flatlined in March according to Halifax, coming in at 2.8%, the same as February. On a monthly basis, prices fell by 0.5%.
Nationwide’s house price data also showed no change in the annual growth rate, which held steady at 3.9% in March. The monthly figure was 0%.
“These price trends are unsurprising, given the end of the stamp duty holiday at the end of March,” said Nationwide’s chief economist Robert Gardner.
“The market is likely to remain a little soft in the coming months since activity will have been brought forward to avoid the additional tax obligations – a pattern typically observed in the wake of the end of stamp duty holidays.”
Economic pressures on the housing market
Other economic pressures won’t have helped the housing market in March.
Throughout the month, households were bracing themselves for a slew of bill hikes that were due in April, with the average household now paying almost £50 more per month in essential costs, according to investment platform Hargreaves Lansdown.
Changes to employers’ National Insurance contributions also kicked in on 1 April, and wage growth is expected to slow going forward as businesses manage the additional costs. Redundancies could also creep up.
Broader economic nervousness has also been building. US president Donald Trump’s “Liberation Day” tariff announcement loomed large throughout March, and unleashed chaos in markets after being delivered on 2 April.
Economists have dialled back recession warnings after some of the harshest tariffs were paused on 9 April, but uncertainty will probably reign for as long as Trump is in the White House.
One silver lining is that mortgage rates have come down in recent days, with lenders now anticipating faster interest rate cuts from the Bank of England. However, the speed of the announcements coming out of the US means even this is difficult to predict.
“As swap rates have dropped, some lenders have moved to cut mortgage rates, with more likely to follow if market conditions persist,” said Ian Futcher, financial planner at wealth management firm Quilter.
“The recently announced pause does change the picture slightly but there is still a huge amount of ambiguity in how things will play out.”
-
Barclays begins paying up to £100 compensation to customers after banking outageBarclays will pay up to £7.5 million in compensation to customers after its banking services were disrupted by an IT outage
-
Review: Shangri-La Paris – an ode to the world’s best foodNatasha Langan enjoys fine French and Chinese cuisine at the Shangri-La Paris
