UK housing market slows as confidence falls ahead of budget, RICS survey shows

The UK housing market cooled in October, with buyer demand and agreed sales declining due to concerns over potential tax increases in Finance Minister Rachel Reeves' upcoming budget. The Royal Institution of Chartered Surveyors (RICS) reported new buyer enquiries falling to -24 and agreed sales to -24, alongside a drop in its house price balance to -19. While mortgage lenders Halifax and Nationwide observed modest monthly price increases, RICS survey respondents broadly expect prices to fall in the short term, underscoring how uncertainty over housing taxation policy is impacting market sentiment and activity.

Analysis

Britain's housing market experienced a significant slowdown in October, primarily driven by heightened uncertainty surrounding potential tax increases in Finance Minister Rachel Reeves' upcoming budget. The Royal Institution of Chartered Surveyors (RICS) reported new buyer enquiries falling to a net balance of -24, down from -21 in September, alongside a decline in agreed home sales to -24 from -17, reflecting a notable contraction in demand.

This weakening sentiment is further evidenced by the RICS house price balance deteriorating to -19 in October from -17. While mortgage lenders Halifax and Nationwide reported modest monthly price increases of 0.6% and 0.3% respectively, leading to annual house price inflation of 1.9% and 2.4%, RICS respondents broadly anticipate price declines over the next three months. This suggests a disconnect between current price data and forward-looking market expectations.

The "cautious mood" is exacerbated by persistent above-target inflation and rising unemployment, according to RICS' head of market research. The clarity provided by the November 26 budget regarding housing taxation policy will be critical; any measures perceived as adding further pressure risk deepening the current market slowdown and impacting broader economic stability.

Key Decisions for Investors

• Monitor the November 26 budget for specific housing taxation policies, as these will directly influence near-term UK housing market sentiment and activity
• Evaluate existing exposure to UK real estate and related financial sectors for potential downside risk, especially if new tax measures are more aggressive than current market expectations
• Consider the short-term negative outlook from RICS respondents against the modest price increases reported by lenders, suggesting a cautious stance on immediate UK housing market appreciation