UK housing demand slumps as buyer confidence wanes, RICS survey shows

Investing.com -- The UK housing market continued to weaken in March, with the latest survey from the Royal Institution of Chartered Surveyors (RICS) showing a further drop in demand and a subdued outlook for sales and prices.

New buyer enquiries fell sharply to a net balance of -32%, down from -16% in February and -1% in January. This marks the lowest reading since September 2023. 

RBC Capital Markets analysts in a note dated Thursday say the data "makes for challenging reading" and suggest that rising economic uncertainty is leading many potential buyers to hold off on large financial commitments.

The number of sales agreed also remained negative, with a net balance of -16% in March. That compares to -13% in February, pointing to continued weakness in transaction volumes. 

Sales expectations for the next three months have significantly declined to -18%, a further drop from the previous month's -6%. 

While estate agents maintain some long-term optimism, 12-month sales expectations have also decreased considerably to a net balance of +11%, down from +32% in February.

More sellers are entering the market despite weakening demand. A net balance of +6% of surveyors reported an increase in new property listings during March. 

However, this additional supply has not translated into price growth. House prices were broadly flat, with just 2% reporting an increase. That’s down sharply from 20% in February and 11% in January.

Expectations for near-term price movements have deteriorated. A net balance of -26% expect prices to fall over the next three months, compared to -16% previously. 

On a one-year view, however, sentiment remains positive, with a net balance of +39% anticipating price increases.

In the lettings market, tenant demand rose in March after four months of negative readings. A net balance of +20% reported increased interest from renters. 

This shift comes as more landlords leave the market, tightening supply and pushing up rental expectations. A net balance of +31% of agents expect rents to rise in the coming three months.

For UK housebuilders, the latest RICS data underscores a difficult operating environment. While the end of the stamp duty holiday had a more direct impact on the second-hand market, new build sales are still vulnerable to broader market sentiment.

RBC Capital Markets notes that housebuilders are already contending with pressure on share prices from international trade tensions, and a potential global slowdown would only add to the uncertainty.

Though long-term fundamentals in the housing sector remain intact, RBC analysts caution that near-term conditions are likely to stay volatile.