UK Real Estate Market Shows Signs of Slowing Down According to RICS
UK's housing market is facing turbulence due to economic and political uncertainties, leading to a slowdown in momentum. According to the latest RICS survey, house prices rose overall in February, but buyer demand weakened significantly. The net balance for buyer demand was -14% in February, down from -1% in January, marking the worst reading since November 2023.
The upcoming changes to stamp duty thresholds are reportedly impacting decision-making, contributing to the slowdown. From 1 April, stamp duty will be due on homes costing more than £125,000, compared to the current threshold of £250,000. As a result, someone buying an average-priced home in England will have to pay an extra £2,500 in tax.
Geopolitical and international economic uncertainties are also causing concern for the housing sector. Simon Rubinson, RICS chief economist, commented, "The UK housing market appears to be losing some momentum as the expiry of the temporary increase in stamp duty thresholds approaches. Some concerns are also being expressed by respondents about the re-emergence of inflationary pressures and the more uncertain geopolitical environment."
Despite the gloomy outlook, RICS expects sales activity and prices to resume an upward trend in the future. Lettings demand has reduced, but the availability of rental properties has dropped at a faster rate, leading to more rent price increases. Tenant demand recorded a figure slightly below zero, pointing to a broadly stagnant trend rather than an abrupt downturn.
In summary, the UK housing market is experiencing a slowdown due to changes in stamp duty thresholds and geopolitical uncertainties. However, RICS expects a resumption of the upward trend in sales activity and prices in the near future, and rent prices are likely to continue increasing despite the subdued demand backdrop.
- The changes to stamp duty thresholds, particularly the reduction in the threshold from £250,000 to £125,000 from 1 April 2023, are affecting investor decisions, significantly contributing to the slowdown in the UK's housing market.
- The upcoming tariffs on real-estate transactions may impact housing finance, as a buyer of an average-priced home in England will have to pay an additional £2,500 in tax, which might further affect the momentum of the housing market.
- The geopolitical and international economic uncertainties are also causing concern for the real-estate sector, with RICS chief economist, Simon Rubinson, noting that the expiry of the temporary increase in stamp duty thresholds and the re-emergence of inflationary pressures are contributing to the slowdown in the UK housing market.
