UK housing market slows as ongoing Middle East conflict raises borrowing costs

Latest News Thu, Apr 9, 2026 6:01 AM

The Royal Institution of Chartered Surveyors (RICS) UK Residential Survey for March 2026 found the market losing momentum as rising borrowing costs and wider geopolitical uncertainty weighed heavily on buyer confidence and sales activity.

New buyer enquiries fell to a net balance of -39%, down from -29% in February, marking the weakest reading since August 2023.

Agreed sales also deteriorated, dropping to a net balance of -34% from -13% the previous month.

The survey points to a market increasingly pressured by inflationary concerns and higher mortgage costs. Short-term sales expectations fell sharply to -33%, compared with -4% in February, suggesting respondents expect activity to weaken further over the coming months. Looking 12 months ahead, sales expectations slipped to -1%, indicating a broadly flat market rather than the modest recovery view seen previously.

House prices also showed renewed signs of softening. The headline price balance fell to -23% in March, down from -14% and -10% in the prior two months, signalling broader downward pressure on values. Expectations for the next three months weakened markedly to -43%, while the 12-month outlook edged down to +2%, pointing to little overall price growth over the year ahead.

Regionally, London, East Anglia, the South East and the South West all posted weaker price readings than the national average, while Scotland and Northern Ireland continued to report rising prices. On the supply side, new instructions remained subdued at -6%, and unsold stock on estate agents’ books rose to an average of 47 properties, up from around 45 at the start of the year.

The lettings market remained more resilient but continued to reflect a mismatch between demand and supply. Tenant demand rose to a net balance of +10% in March, while landlord instructions stayed firmly negative at -25%. Survey respondents expect that imbalance to keep pushing rents higher, with near-term rental expectations rising to +29%.

The March results suggest the housing market has moved onto a softer footing, with affordability pressures, higher financing costs and global instability combining to dampen activity. While the longer-term outlook is not yet signalling a severe downturn, the survey indicates that the optimism seen earlier in the year has largely faded.

Tarrant Parsons, RICS Head of Market Research and Analysis, 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.“

Christopher Clark FRICS at Ely Langley Greig, said: “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.”

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