Confidence in the UK housing market has taken a noticeable hit as escalating geopolitical tensions in the Middle East begin to ripple through buyer sentiment, according to the latest residential market survey from the Royal Institution of Chartered Surveyors (RICS).
The February report paints a picture of a market struggling to build momentum, with renewed global uncertainty, driven in part by the ongoing Iran conflict, weighing heavily on short-term expectations. Surveyors across the UK point to rising concerns over inflation, interest rates and economic stability as key factors dampening activity.
New buyer enquiries declined further during the month, with the headline net balance slipping to -26%, a marked deterioration from -15% in January. This weakening demand is feeding directly into subdued transaction levels, with agreed sales also remaining in negative territory at -12%. Near-term sales expectations have now edged into marginally negative ground, underlining the fragility of the recovery that had tentatively begun at the start of the year.
Despite this softening, there are still signs of underlying resilience. Over a 12-month horizon, a net balance of +17% of respondents expect sales volumes to increase, suggesting that confidence has not evaporated entirely but is instead being deferred by short-term volatility.
House price growth has also stalled, with the national net balance coming in at -12% in February, broadly in line with the previous month and indicative of a flat market. However, this headline figure masks significant regional divergence. London continues to face the most acute downward pressure, with a net balance of -40%, followed by the South East (-24%) and East Anglia (-26%). In contrast, markets in Northern Ireland, Scotland and the North West of England are proving more resilient, with surveyors still reporting firmer price trends.
Short-term price expectations have weakened notably, with the near-term outlook falling to -18% from -6% in January, reflecting growing caution among market participants. Even so, longer-term sentiment remains positive, with a net balance of +33% anticipating modest price growth over the next year — albeit at a slower pace than previously forecast. In London, however, confidence has cooled sharply, with 12-month expectations dropping to just +7% from a previously robust +56%.
Supply dynamics remain relatively stable, with new instructions posting a marginally positive balance of +2%, suggesting no significant influx of new stock. Market appraisals are also largely unchanged, indicating that the pipeline of properties coming to market is steady but not expanding.
The lettings sector continues to reflect structural pressures rather than cyclical weakness. Tenant demand has stabilised, registering a net balance of +2%, but landlord instructions remain firmly negative at -27%, reinforcing the ongoing shortage of rental supply. As a result, upward pressure on rents is expected to persist, with +20% of surveyors forecasting rental growth over the next three months.
RICS attributes much of the recent deterioration in confidence to the broader geopolitical backdrop. The surge in oil and energy prices linked to the Iran conflict has increased expectations that inflation could remain elevated for longer, reducing the likelihood of near-term interest rate cuts and keeping mortgage costs higher than previously anticipated.
Tarrant Parsons, Head of Market Research and Analytics at RICS, said the data highlights a market once again exposed to external shocks.
He noted that while early-year indicators had pointed to a modest improvement in activity, the escalation in global tensions has reversed some of that progress. The prospect of persistently higher borrowing costs is now weighing on both buyers and sellers, softening expectations in the near term.
Looking ahead, the trajectory of the housing market will depend heavily on whether inflationary pressures begin to ease and whether geopolitical tensions stabilise. Until then, the UK property market appears set to remain in a holding pattern, supported by longer-term fundamentals, but constrained by short-term uncertainty.
