The UK housing market lost momentum in September as rising interest rate expectations weighed on buyer demand, sales activity and house prices, according to the latest Royal Institution of Chartered Surveyors (RICS) residential market survey.

The September 2026 survey showed the first deterioration in buyer enquiries since March, interrupting a gradual improvement in sentiment that had been under way for much of the year.

However, despite the setback, market conditions remain considerably less subdued than earlier in 2026, while surveyors continue to anticipate greater stability over the next 12 months.

The net balance for new buyer enquiries fell to -22% in September from -18% in August, ending five consecutive months of improving readings. Nevertheless, the figure remains well above the -41% recorded six months earlier.

Agreed sales also weakened slightly, with the net balance slipping to -18% from -16%. This was still an improvement on the three-month average of -25%, suggesting that transaction activity has not returned to the lows seen earlier in the year.

Expectations for sales over the next three months became marginally more cautious, with the net balance declining to -6% from -3%.

HOUSE PRICES REMAIN UNDER PRESSURE

The survey indicated that downward pressure on house prices persists, with the national price balance falling to -32% from -28% in August.

This marked the end of four consecutive months in which the indicator had become progressively less negative, suggesting that the recent easing in price pressures has stalled.

Most English regions recorded a deterioration in their house price balances during September, with London continuing to report particularly weak conditions relative to the national average.

Scotland and Northern Ireland provided a contrast, with respondents in both markets reporting rising prices, although growth in Scotland remained modest.

Looking ahead, the three-month house price expectations balance stood at -24%, indicating that surveyors anticipate further price declines in the near term.

The 12-month outlook was more stable, with a net balance of zero pointing towards broadly unchanged prices. However, this represents a downgrade from the modest growth anticipated by respondents a couple of months earlier.

PROPERTY LISTINGS EDGE HIGHER

One area of improvement was the supply of properties coming to market, with the new instructions balance reaching +6% in September.

This was the first positive reading since mid-2025, although the relatively small increase suggests that the recovery in new listings remains tentative.

Surveyors also reported that the number of market appraisals undertaken recently remained below levels recorded during the corresponding period last year, potentially limiting the scope for a more sustained improvement in supply.

RENTAL DEMAND CONTINUES TO STRENGTHEN

Conditions in the lettings market presented a different picture, with tenant demand continuing to increase against a backdrop of constrained landlord supply.

The net balance for tenant demand rose to +23% in September, the third consecutive monthly acceleration in the non-seasonally adjusted lettings data.

Meanwhile, landlord instructions remained firmly in negative territory, indicating that the supply of rental properties continues to fall short of demand.

As a result, surveyors expect further rental growth over the coming three months. The rent expectations balance stood at +37%, down from +44% in August but comfortably above the +27% average recorded during the first half of 2026.

BUDGET UNCERTAINTY ADDS TO CAUTION

Tomer Aboody, director of specialist lender MT Finance, said that the combination of economic pressures and uncertainty ahead of the forthcoming Budget is discouraging housing market activity.

He said: “Higher interest rates, higher inflation and higher taxes are an obvious recipe for disaster, not just for the housing market but the wider economy.

“Buyers and sellers are very hesitant, particularly with the Budget coming up later this month, and the fear of even more anti-growth measures.

“Until the government realises that one of the critical measures to stimulate the economy is to support the housing market, we will continue to see hesitancy and a lack of activity.”

The RICS findings suggest that while the housing market remains in a stronger position than at the beginning of the year, renewed concerns over borrowing costs are preventing a more sustained recovery in transactions and prices.