UK House Prices Climb as Buyer Demand Drops—What’s Next for the Market?

The UK property market is showing signs of cooling as buyer demand experiences its sharpest decline in months. According to the latest RICS UK Residential Property Survey, the net balance of buyer demand fell to -14% in February, a steep drop from -1% in January and the lowest level since November 2023.

This shift has left many wondering: Is the market headed for a downturn, or is this just a temporary slowdown?

Let’s break down the key trends shaping the UK housing market today.

Why Is Buyer Demand Falling?

Several factors are contributing to the decline in buyer interest, with the upcoming Stamp Duty threshold reduction being a major one.

Currently, buyers pay no Stamp Duty on properties valued up to £250,000. However, from April 2025, this threshold will be slashed to £125,000, significantly increasing the cost for many homebuyers.

As a result:
✅ Some buyers are rushing to complete purchases before the deadline
❌ Others are holding off, waiting to see how prices react

Beyond tax policy, economic uncertainty is also playing a role. Rising inflation, global market instability, and tighter lending conditions are making both buyers and lenders more cautious.

House Prices Are Still Rising—But More Slowly

Despite lower demand, house prices are still increasing, albeit at a more moderate pace.

• The net balance for price growth was 11% in February, down from 25% in December and 21% in January.

• While this suggests a cooling trend, experts still predict price growth over the next 12 months.

One reason prices remain resilient is the availability of existing housing stock. More properties are being listed, giving buyers more choice. However, the new-build sector is struggling, with developers facing hurdles such as planning delays, higher costs, and economic uncertainty.

Rental Market: Demand Stalls, But Rents Keep Rising

The rental sector is also going through a shift. Tenant demand has stagnated for four consecutive months, marking the longest period without growth since 2012.

📉 Net balance for tenant demand: -4% (unchanged for four months)
📈 Rental prices still rising, with 34% of property professionals expecting further increases over the next three months

Why are rents still climbing despite lower demand?

• Fewer landlords – Many have exited the market due to higher taxes and regulations.

• Limited supply – With fewer rental properties available, prices are being pushed higher, especially in urban areas.

What’s Next for the UK Housing Market?

While buyer demand has dipped, the long-term outlook for the market remains cautiously optimistic.

According to Simon Rubinson, Chief Economist at RICS, the market may recover later this year, depending on inflation trends and government policies.

With the Spring Budget approaching, industry experts are keeping an eye on any potential changes that could impact:
🏡 Property prices
💰 Mortgage rates
📜 Rental regulations

For those considering buying a home, now is a crucial time to assess mortgage options and prepare for potential policy shifts.

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