Estate agents endured a quieter-than-usual April as the latest RICS Residential Market Survey shows a sharp decline in buyer demand and sales activity, with economic uncertainty and the end of the stamp duty holiday weighing on sentiment.
The number of new buyer enquiries fell for the third month running, with a net balance of -33%, while agreed sales also dropped, recording a net balance of -31%.
The last time this level of weakness was seen was in the summer of 2023.
Simon Rubinsohn, RICS’ chief economist, says: “Although geopolitical developments haven’t helped the mood music in the residential market over the past month, the main reason for the dip in the key RICS sales activity metrics lies in the expiry of the stamp duty holiday at the end of March.”
NEGATIVE FEEDBACK
And he adds: “Near term expectations indicators suggest the subdued trend will persist for the next few months at least but looking beyond this, the results are more encouraging reflecting in part the prospect of deeper interest rate cuts than previously anticipated.
“More problematic, however, is the negative feedback in the survey around supply in the rental market.
“With demand continuing to grow, there appears little relief in store for tenants in terms of the upward pressure on rents.
“Critically, even with the rise in the Build-to-Rent to sector the shortfall of affordable rental stock looks set to remain substantial.”
PRICES SOFTENING
Jeremy Leaf, a north London estate agent and former RICS Residential Chairman, says: “Unfortunately, not even the arrival of better weather and the prospect of lower mortgage rates could shake the traditionally busier spring housing market out of its lethargy.
“There’s no doubt the end of the stamp duty holiday in March brought forward many moving decisions.”
Leaf adds that while demand for flats has been weak, the market for houses has remained stronger than expected.
“Prices are softening as most buyers and sellers are not withdrawing but preferring to find middle ground if possible despite continuing worries about economic prospects.”
EXPECTATIONS
Short-term market sentiment remains muted, with expectations for further declines in sales and house prices. However, looking further ahead, 17% more respondents expect sales to pick up over the next year, and 39% foresee house price growth returning.
Supply conditions remain largely unchanged. The number of new listings stayed flat, and appraisals rose only marginally, signalling little change in the availability of stock.
In the lettings sector, tenant demand increased during the quarter to April, with a net balance of +14%, while landlord instructions continued to fall, reaching -26%.
This persistent mismatch between demand and supply is keeping upward pressure on rents.
“We have noticed considerably more tenant interest but a resistance to paying higher rents.”
Leaf adds: “We have noticed considerably more tenant interest but a resistance to paying higher rents.
“However, lack of supply, particularly of one and two bedroom flats in more popular areas, is preventing a more marked downturn in values.”
And he warns that little relief is expected in the short term, especially as the Renters’ Rights Bill nears implementation, which could further discourage landlords from remaining in the sector.
TARIFF TURBULENCE
Tom Bill, head of UK residential research at Knight Frank, says: “Despite a predictable lull in April following the stamp duty cliff edge, demand in the UK housing market is relatively robust.
“The tariff turbulence means the Bank of England is expected to cut rates more quickly, which means more sub-4% mortgages have appeared although demand would falter if things got too bumpy.
“However, the inflationary impact of measures like higher rates of employer national insurance is a risk that could push borrowing costs up later this year.”
RENTALS
And he adds: “The unintended consequences of the Renters Rights Bill are becoming more apparent as supply gets tighter. A piece of legislation designed to protect tenants may ultimately push rents higher as some landlords decide to sell.
“Together with tougher green regulations and higher mortgage costs, it means the choice for tenants is narrowing.”
