Britain’s housing market is showing early signs of recovery after a prolonged slowdown, with buyer demand and sales activity becoming less negative and price expectations strengthening for the year ahead.
The latest Royal Institution of Chartered Surveyors (RICS) Residential Market Survey for January suggests the downturn may be bottoming out, even as activity levels remain subdued and regional divides widen.
New buyer enquiries improved for the third consecutive month, with the net balance rising to -15% in January, up from -21% in December and -29% in November. Agreed sales also showed their least negative reading since June 2025, at -9%.
Nationally, house prices appear to have stabilised. The net balance for prices over the past three months stood at -10%, an improvement from -19% in October. While still in negative territory, the steady upward trajectory points to easing downward pressure.
REGIONAL TRENDS
Performance across the country remains uneven. Scotland and Northern Ireland continue to record the strongest price growth, with the North West and North of England also reporting resilience. London, the South East, South West and East Anglia remain weaker, reflecting affordability constraints, though conditions in those regions have improved modestly.
Surveyors are increasingly optimistic about the year ahead. Expectations for sales over the next 12 months rose sharply to a net balance of +35%, the strongest reading since December 2024. Price expectations are similarly upbeat, with +43% of respondents anticipating higher prices over the coming year – the most positive outlook since February 2025.
In the lettings market, tenant demand ticked higher after two flat quarters, while landlord instructions remained firmly negative, suggesting further rental price growth in the near term.
GRADUAL RECOVERY
Simon Rubinsohn, Chief Economist at RICS, says: “There are early signs that market conditions may be improving after a challenging period, although activity levels are still subdued, meaning any recovery is likely to be gradual.
“While the strengthening twelve-month outlook is encouraging, near-term expectations remain relatively soft, reflecting ongoing economic uncertainty.
“Whether this tentative improvement develops into sustained momentum will depend heavily on the trajectory of mortgage rates and broader macro confidence over the coming months.”
UNSETTLING LANDSCAPE
Tom Bill, head of UK residential research at Knight Frank, says: “Plans put on hold by the Budget were activated either side of Christmas, which produced positive demand signals in the early weeks of the year.
“However, buyers and sellers are once again operating against the unsettling backdrop of a Prime Minister on borrowed time.
“A leadership challenge is likely to derail sentiment in the short term but demand in the longer-term will be shaped by the economic policy platform of any new Prime Minister and whether falling inflation can drag down mortgage rates with it.”
CONFIDENCE IS UP
Jeremy Leaf, north London estate agent and a former RICS Residential Chairman, says: “Buyer enquiries and sales agreed, particularly for smaller houses and not so much flats, have improved considerably since the beginning of the year.
“This consistently-reliable lead indicator of change confirms what we have seen in our offices after a slower than expected few months – confidence is on the up. However, an increase in listings as well as appraisals, ongoing worries about the economy and slow pace of anticipated mortgage rate cuts, are keeping transaction lengths up and prices in check.”
RENTS ARE HOLDING
And he adds: “Although we have found more tenants are ‘feeling the pinch’, the shortage of stock prompted particularly by landlords still selling up, has meant rents are holding up relatively well.
“Disappointingly, we are seeing little appetite from would-be investors for new buy-to-let opportunities so the supply/demand imbalance and upward direction of travel for rents is unlikely to change in the near term at least.”
