Sales outlook hits three-year low as rates rise, says RICS

The outlook for housing sales has fallen to its weakest level since July 2023, the latest Royal Institution of Chartered Surveyors (RICS) UK Residential Market Survey has revealed.

RICS members have warned that renewed increases in mortgage rates weighed on buyer demand in October, contributing to falling agreed sales and further downward pressure on house prices.

Respondents expect both sales activity and prices to soften during the next 12 months.

Home buyer demand remains subdued, and respondents are bracing for a weaker year ahead.”

The new buyer enquiries indicator remained at a net balance of -24%, unchanged from September, with virtually all parts of the UK reporting either falling or stagnant demand.

Meanwhile, the agreed sales balance slipped to -24% from -18%, its weakest reading in three months.

Looking ahead, 12-month sales expectations fell to a net balance of -17%, the most pessimistic assessment since July 2023.

Expectations for the next three months were also negative, at -11%.

House price forecasts

House price expectations during the next three months continued to edge lower, with the headline balance falling to -36% from -34%. It marks a second consecutive monthly deterioration following signs of stabilisation over the summer.

Respondents also revised down their expectations for the year ahead. The 12-month price expectations balance fell to -17% from zero, with separate percentage estimates pointing to a relatively modest decline of around 1%.

The flow of homes coming onto the sales market has also weakened.

New instructions slipped to a net balance of -8%, from +6% previously, while the market appraisals indicator fell to -34%, its lowest since November 2025. Together, these suggest the pipeline of new listings could slow further in the coming months, RICS said.

In the lettings market, pressure on rents strengthened as tenant demand returned to modest growth while landlord instructions continued to fall. On the quarterly, seasonally adjusted measure, tenant demand rose to a net balance of +7%, from -1%, while landlord instructions registered -30%.

Against this backdrop, expectations for rental growth over the next three months climbed to +41%, from +29%, their strongest reading since early 2024.

Tarrant Parsons (pictured), RICS Head of Market Research and Analysis, says: “Home buyer demand remains subdued, and respondents are bracing for a weaker year ahead for sales given the persistent macroeconomic challenges being faced.

“In accordance with this, the Bank of England’s rate rise was accompanied by a clear warning that policy may need to tighten further if higher energy costs feed through into wider prices. With inflation now projected to approach 5% next year, mortgage rates are likely to remain elevated for longer, thereby continuing to weigh on the market.“

Industry reaction

Tom Bill, head of UK residential research at Knight Frank, says: “The latest slump in confidence shows how decisions in Washington not Westminster are shaping the outlook for the UK housing market.

“Rising mortgage rates have put downward pressure on sales volumes and prices this year due to the energy price shock caused by the Middle East conflict.

“There is growing pressure on Donald Trump to find a diplomatic solution following the mid-term elections, which means borrowing costs have started edging lower over the last week, a trend that would only accelerate if a lasting ceasefire was agreed.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “Of more concern with these figures, confirmed by what we’re seeing in our offices, is the lack of near-term expectation of improvement.

“If anything, the most significant influencers of confidence – mortgage rates and the cost of living – are likely to get worse before they improve

“On a positive note, we are finding the bad news does seem to have brought more realism to some sellers who appreciate this is as good as it gets – at least for a while.