RICS: Housing market subdued in May but outlook brightens as sales stabilise

The housing market remains subdued following April’s stamp duty hike, with sellers outnumbering buyers, according to the latest survey by the Royal Institution of Chartered Surveyors (RICS).

It said that estate agents reported a fall in new buyer enquiries last month, while house prices were broadly unchanged.

However, RICS says there are signs that “the worst may be over for now”, and that “sentiment around the near-term outlook is showing tentative signs of improvement”.

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The subdued property market is in contrast to what Zoopla saw in May, when it reported the highest number of property sales agreed for four years. But, the property portal said sellers were having to lower their asking price by an average of £16,000 to secure a deal.

RICS said the stamp duty changes at the end of March were continuing to weigh on buyer activity, while uncertainty around global trade policies and interest rates were headwinds for the housing market going forward.

Having said that, the institution was optimistic about the housing measures announced in the Spending Review. RICS chief economist Simon Rubinsohn said the government’s commitment to a longer-term affordable housing settlement should boost supply, support broader economic stability and create a better functioning property market.

How is the housing market performing?

According to RICS, buyer demand and sales activity remain in negative territory. A net balance of -26% of survey participants - which includes estate agents and surveyors - reported a fall in new buyer enquiries in May.

This marks the fifth consecutive month of decline, but the figure is slightly less downbeat than in March and April. Agreed sales also continue to edge lower, returning a net balance of -28%.

On the supply side, new instructions coming to market are edging up. A net balance of +7% of respondents saw a rise in new listings, marking the 11th consecutive month of growth. Valuation activity also picked up, with +19% noting an increase in appraisals compared to a year ago, indicating a potentially more active summer market.

Tarrant Parsons, senior economist at RICS, commented: “Sentiment across the UK residential property market remains somewhat subdued, with ongoing uncertainty around global trade policies and the dampening effect of transactions being brought forward ahead of the stamp duty changes at the end of March continuing to weigh on buyer activity.

“However, near-term sales expectations are showing signs of stabilisation, suggesting that while muted conditions may persist in the short term, a further deterioration appears unlikely.

“Looking ahead, the outlook is more optimistic, with respondents anticipating a gradual recovery in sales activity over the next 12 months.”

A quarter of RICS respondents anticipate an increase in sales volumes over the next year, the strongest reading since February.

What’s the outlook for house prices?

The picture for house prices remains largely unchanged, according to RICS. The national net balance slipped to -8% in May, from -3% the previous month, but continues to suggest a relatively flat market overall. Price expectations for the next 12 months remain in positive territory, with a net balance of +34% of respondents expecting house prices to rise.

The latest house price index from Halifax revealed that UK house prices dropped by 0.4% (around £1,150) in May, with the average cost of a home now costing £296,648.

Capital Economics forecasts that house prices will rise by 3.5% in the year to the fourth quarter of 2025. However, Alex Kerr, UK economist at the consultancy, warns that the “recent soft patch for house prices is more than just a stamp duty-induced, temporary blip”.

“House prices on the Halifax measure fell in four of the six months to May and April’s mortgage approvals suggest a significant increase in transactions is not in the pipeline,” he added.

“Without a bigger rebound in housing demand in the next couple of months, it appears increasingly likely that more of the recent weakness is a result of the softer outlook for the economy and employment rather than temporary stamp duty influences.

“That means the recovery in housing transactions from 64,700 in April to their pre-pandemic average of 100,000 per month may take a bit longer than we currently anticipate. And house price growth may be a bit softer than our above-consensus forecast of 3.5%.”

Tom Bill, head of UK residential research at Knight Frank, says the lack of buyer demand means sellers may need to reduce their prices, “particularly if the plan is to move before the Autumn Budget potentially puts another dent in confidence”.

Jeremy Leaf, north London estate agent and a former RICS residential chairman, adds: “Existing transactions are not generally falling through but are more protracted. Buyers are even more in control, negotiating hard and taking their time before deciding on an enviable choice of properties – particularly flats.”