The ongoing conflict in the Middle East is taking a toll on the housing market in England and Wales, with estate agents reporting a noticeable softening in demand from potential homebuyers. According to a monthly survey by the Royal Institution of Chartered Surveyors (RICS), buyers and sellers are becoming more cautious due to fears of rising mortgage rates and inflation linked to the war.
The RICS survey found that a net balance of 34% of members reported a fall in new buyer inquiries in April, slightly improving from 40% in March but still indicating weak market momentum. Agreed sales also deteriorated, with a net balance of 36% of members reporting a decline, while the flow of new properties for sale remained largely stagnant.
House prices have fallen over the past three months, with 34% more members reporting decreases than increases, a further deterioration from the previous month. Regional divides are widening, with stronger price falls in London, the south-east, East Anglia and the south-west, while the north-west and north of England posted marginally positive readings.
In the rental market, demand continues to outpace supply as landlords exit the sector due to increasing regulation and taxes. A net balance of 14% of RICS members reported a rise in tenant demand over the past three months, while new instructions from landlords dropped. A net balance of 25% of respondents expect rents to rise in the coming months.
The Bank of England has warned that interest rates may need to increase as higher inflation is unavoidable due to the war, affecting mortgage rates. Tarrant Parsons of RICS said activity and sentiment are likely to remain subdued until there is a clearer path for inflation and borrowing costs, particularly in southern England and London where affordability pressures are most acute.
