​Iran crisis sees near-term expectations dip in housing market, RICS survey finds

Geopolitical uncertainty is weighing on buyer sentiment and near-term expectations, according to the Royal Institution of Chartered Surveyors.

The body’s UK residential market survey for February painted a picture of weakened confidence among surveyors, who cited concerns over inflation, interest rates and global instability intensified.

New buyer enquiries dropped from -15% to -26% from January to February, while agreed sales stood at -12% and near-term sales expectations softened to -2%.

The ‘net balance’ figures published in the monthly sentiment survey refers to the proportion of respondents reporting a rise in a particular metric, minus the proportion reporting a fall.

House prices were broadly flat, while surveyors became more cautious on prices in the near term, with expectations falling to -18% from -6%.

Tarrant Parsons, RICS head of market research and analytics, said the survey highlighted “renewed volatility” and that “the deterioration in the geopolitical backdrop has clearly weighed on confidence”. 

“The recent rise in oil and energy prices has also increased the likelihood that mortgage rates will remain higher for longer,” he said. 

“As a result, near-term expectations have softened. Although the twelve-month outlook remains positive overall, maintaining that trajectory will depend on the recent spike in inflationary pressures easing in the months ahead.”

Sentiment for the longer term was more positive, with a net balance of +17% still expecting sales activity to rise over the next 12 months and +33% expecting prices to edge higher over the same period, though at a more moderate pace than previously anticipated.

In a note on the survey, broker Investec said: “The latest RICS survey is the first sign that the good start to the year for the housing market is stalling. How bad this gets clearly hinges on the severity and duration of events in the Middle East. Clearly, the key impact on the housing market will be from the impact on inflation and swap rates feeding into higher mortgage rates and consumer confidence.

“It looks likely that at best the good momentum seen in recent weeks will weaken the likelihood of the hoped for recovery gaining momentum this year. If inflationary expectations step up with swap rates moving persistently higher, affordability issues will remain a significant constraint.”