The UK housing market lost momentum in March with rising borrowing costs and geopolitical uncertainty dragging on buyer demand and sales activity, according to the latest survey from Royal Institution of Chartered Surveyors.

New buyer enquiries fell sharply to a net balance of -39%, down from -29% in February, marking the weakest reading since August 2023. Agreed sales also deteriorated, dropping to -34% from -13% the previous month.

The slowdown comes as mortgage pricing pushes higher, with fixed rates moving back above 5% in recent weeks, further squeezing affordability and reducing borrower appetite.

Short-term sales expectations weakened significantly to -33%, compared with -4% in February, suggesting activity is set to remain subdued in the near term. The 12-month outlook has also cooled, slipping to -1% from previously positive territory.

DOWNWARD PRICE PRESSURE

House prices are now showing clearer signs of downward pressure, with the headline price balance falling to -23% in March, from -14% and -10% in the prior two months. Near-term expectations also deteriorated, with respondents anticipating further modest declines over the next three months.

The softer trend is most pronounced across London, the South East and South West, while Scotland and Northern Ireland continue to show more resilient price growth.

Supply remains constrained, with new instructions at -6%, although unsold stock levels have edged higher to an average of 47 properties per branch, up from around 45 at the start of the year.

CHALLENGING BACKDROP

The data points to a more challenging market backdrop with affordability pressures, higher rates and increased uncertainty combining to slow pipeline momentum and extend transaction timelines.

The lettings market remains more robust, however, with tenant demand at +10% and landlord instructions still in negative territory at -25%, continuing to drive rental growth expectations.

MOOD SHIFT

Tarrant Parsons, head of market research and analysis at RICS, said: “The mood across the UK housing market has shifted markedly over the past couple of months.

“What had been a cautiously improving picture for activity has been knocked off course by the wider macro fallout from the Middle East conflict, as the renewed deterioration in the mortgage rate outlook has proved particularly challenging.

“Indeed, with average fixed rates climbing back above 5% according to some sources, it is unsurprising that buyer demand has softened.

“The path ahead hinges on whether or not recent surges in oil and energy costs begin to reverse in what remains a highly uncertain geopolitical environment.”

IMPOSSIBLE MARKET

Christopher Clark FRICS at Hampshire-based Ely Langley Greig, added: “It’s impossible to know what is happening to the residential market at the moment. Only time will tell whether the Middle East conflict escalates or reaches a resolution, and the outcome of that war will determine how the market performs in the months and possibly years to come.”

Trevor Brown FRICS, of Trevor Brown Surveyors, said: “Entering what has traditionally been the strongest buying/selling months the market remains sluggish. Most of our (survey) clients are ‘have to move’ not ‘want to move’. National and international uncertainty remains and prices are stagnant. Sales volumes are reported to be low.”

And Tony Dobbins MRICS, of Anthony Jones Properties in Darlington, added: “North East prices up 2.8% annually, outperforming the UK average of 1.3%. Mainstream demand remains solid; premium stock above £400k requires pricing discipline. Rising mortgage rates are cooling early enquiries but committed movers continue to transact across our region.”