Subdued property market set to continue, RICS warns

Buyers and sellers are becoming more tentative amid concerns of interest rate rises, the Royal Institution of Chartered Surveyors (RICS) claims.

The latest RICS Residential Market Survey suggests the property market lost some momentum in September as higher interest rate expectations weighed on buyer confidence.

The survey’s new buyer enquiries net balance fell to a net balance of -22% in September, from -18% in August, marking the first month since March where the indicator weakened.

The reading remains significantly stronger than the recent low of -41%, recorded six months ago, RICS said.

Meanwhile, the agreed sales net balance slipped to -18% from -16%, although this was still less negative than the three-month average of -25%. Expectations for sales over the coming three months also softened, with the net balance falling to -6% from -3%.

A renewed rise in interest rate expectations has created a fresh headwind for the housing market.”

There were some tentative signs of increased supply. The balance for new sales instructions moved to +6%, the first positive reading since mid-2025, although RICS respondents indicated that market appraisal activity remains below levels seen a year earlier.

House prices continued to face downward pressure during September. The headline house price net balance fell to -32%, from -28% in August, ending four consecutive months in which the indicator had been becoming progressively less negative.

Regional differences remain significant. Most parts of England reported more negative price balances in September, with London notably weaker than the national headline figure. In contrast, prices continued to rise in Northern Ireland, while Scotland recorded modest price growth.

Looking ahead, the three-month house price expectations balance stood at -24%, signalling expectations of further near-term pressure. Over a 12-month horizon, however, the balance was zero, indicating respondents now expect a broadly flat trend in house prices.

Contrasting lettings picture

The lettings market presented a contrasting picture, with tenant demand continuing to rise while landlord supply remained constrained.

A net balance of +23% of respondents reported an increase in tenant demand during the month, the third consecutive monthly acceleration in the measure. At the same time, landlord instructions remained firmly in negative territory.

As a result, expectations for further rental growth remain elevated. A net balance of +37% of contributors expects rents to rise over the next three months. Although down from +44% in August, this remains well above the +27% average recorded during the first half of 2026, RICS added.

Tarrant Parsons (pictured), RICS Head of Market Research and Analysis, says: “A renewed rise in interest rate expectations has created a fresh headwind for the housing market, with buyers becoming a little more cautious and sales activity losing some momentum this month.

“Even so, the latest results do not point to any significant shift in direction. Rather, they suggest the market may need to contend with a somewhat longer period of subdued activity as households adjust to the prospect of borrowing costs remaining higher than previously anticipated.”

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Author: Gemma