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UK estate agents were at their gloomiest in more than two years last month as higher mortgage rates in the wake of the Middle East conflict hurt demand and sales.
The Royal Institution of Chartered Surveyors (Rics) said on Thursday that its gauge of house prices fell to minus 34 in April, from minus 25 in March.
The index, which measures the share of estate agents reporting rises and falls in house prices, was at its lowest since November 2023 when mortgage rates were near their peak.
The survey also reported that its measure of new buyer enquiries was firmly negative at minus 34, with the indicator for agreed sales also weak at minus 36. The assessment was little changed from March, when mortgage rates rose following the start of the US war on Iran at the end of February.
Tarrant Parsons, head of market research & analysis at RICS, said the housing market was “in the grip of macro headwinds stemming from the Middle East conflict”.
“Recent warnings from the Bank of England that interest rate rises may be required to tackle renewed inflation, driven by elevated oil prices and disrupted supply chains, underline the challenging environment facing buyers.”
Quoted mortgage rates have risen sharply since the start of the war as expectations for interest rates have shifted, although they have stabilised in recent weeks and remain well below their 2023 levels.
The average two-year fixed mortgage rate with a 60 per cent loan-to-value rose to 5 per cent in April, up from 3.8 per cent in February, Bank of England data showed. The same deal with a 90 per cent loan-to-value rose to 5.5 per cent in April from 4.3 per cent in February.
Colin Townsend, chartered surveyor at estate agent John Goodwin, said: “Only buyers who are really focused on moving are actually purchasing. Most are sitting on their hands and waiting to see what happens with inflation and mortgage rates.”
“There is a sense of nervousness,” he added.
Earlier this month, lender Nationwide reported increased house prices in April, while Halifax reported its second consecutive fall last month. Mortgage approvals rose in March, according to BoE data, with some analysts attributing it to borrowers rushing to secure deals as lenders withdrew and changed deals at short notice.
Tom Bill, head of UK residential research at Knight Frank, said: “Those sitting on mortgage offers that predate the conflict [in Iran] are keen to transact, but downwards pressure on prices will increase as offers lapse in coming months.”
The Rics survey suggests the property market will weaken in the months ahead. The index tracking estate agents’ expectations for house prices over the next three months was negative at minus 38, although slightly less downbeat than March’s minus 45.
The indices tracking sales expectations for the next three and 12 months were also negative, according to the survey.
Mark Wood, head of land acquisitions at the estate agent Blues Property, said: “The uncertainty over the conflict in the Middle East has stalled the market with many potential purchasers worried about the increase in cost of living and potential mortgage rate increases.”