The UK property market showed signs of slowing down in February, with buyer demand experiencing its sharpest decline in months, according to the latest RICS UK Residential Property Survey. The report revealed a net balance of -14% in buyer demand, a significant drop from -1% in January, marking the weakest level of interest since November 2023.
This cooling of the market is largely attributed to the upcoming Stamp Duty threshold reduction, which takes effect in April 2025. Currently, buyers purchasing properties valued at £250,000 or below are exempt from stamp duty, but from April, the threshold will be cut in half to £125,000. This means many buyers are either rushing to finalize their purchases before the deadline or delaying decisions to see how the market reacts.
Beyond domestic policy, external economic factors are also playing a role in dampening confidence. Inflationary pressures, geopolitical tensions, and uncertainty in global financial markets have contributed to a more cautious approach from both buyers and lenders.
House Prices Hold Firm, But Growth Slows
Despite the decline in buyer activity, house prices at a national level continue to rise, though at a more moderate pace than in previous months. The net balance for price growth stood at 11% in February, showing a clear downward trend from 25% in December and 21% in January. While this moderation indicates a cooling period, property prices are still on an upward trajectory, with many experts predicting a continued increase over the next 12 months.
A notable factor supporting house prices is the availability of existing housing stock. More properties are coming onto the market, giving buyers a greater range of options. However, the new-build sector remains weak, with developers facing challenges due to planning restrictions, economic uncertainty, and rising material costs.
Rental Market: Stagnant Demand but Rising Prices
The UK rental market is also experiencing a period of stagnation, with tenant demand recording a net balance of -4% for the fourth consecutive month. This represents the longest stretch without a positive demand reading since the dataset began in 2012. However, despite the subdued demand, rental prices continue to climb.
A net balance of 34% of market professionals expect rental prices to increase over the next three months, driven by a lack of supply. Many landlords have exited the market due to increasing regulatory and tax burdens, leaving fewer properties available for rent. This imbalance between low tenant demand and even lower supply is pushing rents higher, particularly in urban areas with strong employment opportunities.
Curious About How Much You Can Borrow?
With house prices still rising and affordability concerns becoming more pressing, it’s more important than ever to understand your borrowing power. Whether you’re a first-time buyer aiming to secure a property before the stamp duty changes or a contractor navigating mortgage eligibility, our How Much Can I Borrow Calculator can help.
Simply input your financial details, and our tool will provide an estimate of how much you could borrow based on your income and financial profile. In a market where lenders are becoming more selective, having clarity on your mortgage affordability can give you a crucial edge when making an offer.
What Lies Ahead for the UK Housing Market?
Despite the current slowdown, many experts remain optimistic about the long-term health of the UK housing market. RICS Chief Economist Simon Rubinson noted that while inflation concerns and global uncertainties persist, the housing market is expected to recover later this year.
Additionally, government policies—particularly those outlined in the upcoming Spring Statement—will play a crucial role in shaping future demand. Investors, landlords, and homebuyers alike are closely watching for any new policies that could affect property prices, mortgage rates, or rental regulations.
For contractors and self-employed professionals, securing the right mortgage can be challenging, but Contractor Mortgage Solutions is here to help. With specialist mortgage advice tailored to your unique income structure, we ensure you get the best mortgage deal possible—whether you’re a first-time buyer, home mover, or looking to remortgage.