The UK housing market may be showing early signs of stabilisation but mortgage brokers are likely to face a challenging summer as buyer demand, agreed sales and house prices all remain in negative territory, according to the latest RICS Residential Market Survey.

The survey found that new buyer enquiries remained unchanged at a net balance of -34% in May, marking the first month since January in which demand has not deteriorated further. Agreed sales also held steady at -37%, suggesting that while activity remains subdued, the pace of decline is no longer worsening.

The data points to a market where borrowers remain active but cautious, with affordability pressures and economic uncertainty continuing to influence purchasing decisions.

The survey also highlighted a growing disconnect between buyers and sellers, with many vendors still pricing homes at levels the market is unwilling to support.

UNDER PRESSURE

House prices remained under pressure, with the headline price balance holding at -35% for a second consecutive month. Surveyors reported the greatest weakness in the South East and East Anglia, while Northern Ireland continued to outperform with stronger price growth.

Despite the subdued backdrop, forward-looking indicators were slightly more encouraging. Near-term sales expectations improved to -25%, while 12-month sales expectations moved into positive territory at +2%.

Confidence over the longer term is beginning to improve, particularly as lenders continue to compete for business and affordability criteria gradually evolve.

However, the latest figures suggest transactions are taking longer to complete. The average time between listing and completion increased to 21.5 weeks, the longest period recorded since RICS began tracking the measure in 2017.

The rental market remains a significant driver of mortgage activity, particularly for landlords and buy-to-let investors. Tenant demand strengthened during May, with a net balance of +14% reporting an increase, while landlord instructions remained firmly negative at -28%.

As a result, rent expectations rose to +36%, the highest reading for a year, underlining the ongoing supply shortage across the private rented sector.

SUBDUED DEMAND

Tarrant Parsons (main picture, inset), head of market research and analysis at RICS, said the market was showing signs of finding a floor but warned that it was too early to talk about recovery.

“The latest survey data suggest the recent downturn in activity may be beginning to stabilise, with several key indicators broadly holding steady. However, as they remain in negative territory, it would be premature to interpret this as the start of a recovery.”

The findings come as brokers continue to navigate a market shaped by affordability constraints, evolving lender criteria and uncertainty over the future path of interest rates.

While buyer demand remains subdued, the absence of further deterioration may offer some encouragement that activity levels are beginning to stabilise ahead of the second half of the year.

MARKET STANDOFF

Stan Shaw, RICS Registered Valuer at Mervyn Smith, said: “An obvious standoff in the market where too many vendors are still hanging out for a price which is no longer achievable and available stock is growing.

“Conversely when new properties come on at an appropriate figure there are available willing buyers.”

And Tony Dobbins MRICS, Darlington, Anthony Jones Properties, added: “May showed resilience beneath a softening headline.

“Buyer demand remains genuine across mainstream price points, with serious purchasers continuing to transact. Above £400,000 the market is more selective, and accurate pricing at instruction is proving the single biggest determinant of outcome.”

LOWER STAMP DUTY

Tomer Aboody, director of specialist lender MT Finance, said: “With a further decline in demand and transactions, there is a lack of confidence in the market as buyers adopt a cautious approach.

“As the Chancellor targets landlords further with higher stamp duty for those buying second homes, would-be tenants are seeing rents increase as a consequence of lower supply.

“This demonstrates that further punishing landlords has the opposite impact to what the market actually needs. Until there comes a time when the government doesn’t regard landlords as the enemy, the fallout will be felt by tenants.

“We need the government to encourage both homeowners and landlords, and this can predominately be done by lower stamp duty.”