RICS: UK house prices likely to fall as Budget tax-rumour chills market

More members of the Royal Institution of Chartered Surveyors reported house prices falling in their areas in August than those who reported rises, and a larger share expect prices to fall over the next three months, according to the industry body’s latest monthly survey.

RICS members pointed to mounting uncertainty about potential changes to property taxes ahead of the Autumn Budget, a renewed rise in mortgage pricing and weakening buyer enquiries as the main factors slowing the market. Over a 12-month horizon the survey showed a marginal consensus for price growth, but the reading was the most negative for members since December 2023.

The survey, which polls estate agents and chartered surveyors on conditions on the ground, found the downturn in August was broad-based, with East Anglia and the South West of England recording the bulk of negative reports. In addition to the immediate three-month outlook showing more pessimists than optimists, RICS members also reported a second consecutive monthly fall in buyer enquiries and a sharper drop in agreed sales compared with July.

Members quoted in the survey linked the slowdown to speculation that the governing party could announce sweeping property tax changes in the Autumn Budget, which could be delivered in late November. "Many selling agents are rolling out the annual excuse of the holiday season for sluggish activity, but there is a real sense that the market is cooling and unlikely to breathe signs of recovery until after the Budget," said Neil Foster, a RICS member in Hexham, Northumberland. "More pain for homeowners from the Chancellor could precipitate even weaker demand."

"Now that the Autumn Budget has been announced for late November and with media speculation about possible changes to stamp duty and capital gains, I can’t see the market picking up into the autumn," said James Brown, a RICS member in Richmond, North Yorkshire.

Mortgage pricing has also moved higher in recent days, compounding the uncertainty for buyers. HSBC, Halifax, Nationwide Building Society and Santander all announced rate increases in the week prior to the survey, contributing to an environment in which fixed-rate mortgage pricing is increasingly influenced by expectations for Bank of England policy. After a recent split decision at the central bank, markets are not pricing in further rate cuts this year, with many expecting the next move to come in the spring.

Several survey respondents described transaction friction that is weighing on completed sales. "Another key factor behind the sales slump is a breakdown in property chains, with people getting cold feet and pulling out at the last minute," said Brian John Boys, a RICS member in Bacup, Lancashire. Eliana Davis, a member in Bristol, said buyer confidence in the city is low, with an increased number of properties for sale and a rise in renegotiations that is lengthening the time each transaction takes.

In Birmingham, Andrew Clive Major Oulsnam said the market hardened in August as fewer houses came to market and fewer sales were agreed. In Staines, John Frost pointed to a particular glut of flats and apartments, saying the large volume of such properties was pushing prices down and making sales harder to secure.

RICS said sales activity is expected to remain broadly flat over the coming 12 months, even as the shorter-term picture is more downbeat. The combination of tax-change speculation, rising mortgage costs and the prospect of prolonged uncertainty up to the Autumn Budget is, according to members, likely to suppress demand until tax policy is clarified.

The survey highlights how fiscal policy expectations and financial-market movements can interact to influence housing market activity. Mortgage lenders’ pricing responds to money-market views of future interest rates, while announced or rumoured changes to stamp duty or capital gains treatment can prompt would-be buyers and sellers to delay decisions until policy clarity is provided.

The RICS reading adds to a series of indicators suggesting cooling in the UK housing market, though longer-term forecasts remain mixed. For now, industry members surveyed expect only marginal price growth over a 12-month period but anticipate a period of weaker activity through the autumn as the Budget approaches.