RICS Survey: July's Housing Stagnation Signals a Longer Chill Ahead

The latest RICS Residential Market Survey confirms what many agents and investors have suspected for months: the UK housing market spent July treading water rather than building momentum. Surveyors reported a net balance of new buyer enquiries at around -18%, extending a run of subdued demand readings that has now persisted since the spring. Agreed sales fared little better, with a net balance of -15%, while new instructions to sell also softened, leaving stock levels broadly unchanged. For a market that many hoped would find its footing after a turbulent first half of 2025, this is a sobering signal.

The reasons are not mysterious. Mortgage rates, while off their 2023 peaks, remain stubbornly above the sub-3% levels borrowers grew accustomed to before 2022. The average two-year fixed rate is hovering around 5.1%, and lenders have been slow to pass through the modest cuts in swap rates seen over the summer. Combined with ongoing cost-of-living pressures and a jittery labour market, many prospective buyers — particularly first-time buyers stretching to the limits of affordability — are simply waiting on the sidelines. This matters enormously for investors because buyer hesitancy at the entry level of the market has a knock-on effect through every rung of the housing ladder, slowing chain-dependent transactions and reducing overall liquidity.

Regional divergence remains a defining feature of this cycle. London and the South East, including commuter-belt markets such as Surrey, continue to underperform relative to the North, with surveyors citing affordability constraints and stretched price-to-income ratios as the primary drag. By contrast, Manchester, Leeds and Liverpool are reporting comparatively resilient enquiry levels, buoyed by stronger rental yields, more affordable entry prices, and continued inward investment into regional economic hubs. Newcastle, too, has shown pockets of stability, particularly in the flat and terraced house segment favoured by first-time buyers and buy-to-let landlords alike. Birmingham sits somewhere in between, with HS2-related uncertainty tempering what would otherwise be a stronger growth story given its ongoing regeneration pipeline.

For buy-to-let landlords, July's figures reinforce a familiar calculus: capital growth is unlikely to be the primary driver of returns in the near term, but rental demand remains robust. Surveyors' letting market feedback continues to point to tenant demand outstripping supply in most regions, with rents forecast to rise by 3-4% over the next 12 months even as sales activity stagnates. This bifurcation — soft sales market, firm rental market — is likely to persist, and landlords with strong yield fundamentals in cities like Manchester and Liverpool are better positioned than those holding higher-value, lower-yield stock in London and the South East.

Commercial investors and developers should read the survey as confirmation that the broader property market recovery will be gradual rather than sharp. Housebuilders have already scaled back land acquisition in response to weaker sales velocity, and the RICS data suggests this caution is well founded. Development finance remains available but is being priced conservatively, and lenders are increasingly demanding evidence of pre-sales or robust rental cover before releasing funds for speculative schemes. Expect further consolidation among smaller regional developers over the coming year, alongside continued appetite from institutional investors for purpose-built rental stock, which offers more predictable income streams than for-sale housing in the current environment.

Looking ahead six to twelve months, the most plausible scenario is one of gradual, uneven improvement rather than a sharp rebound. Surveyors' twelve-month price expectations remain marginally positive at a net balance of +5%, suggesting confidence that any further falls will be shallow, but the near-term sales outlook — at -8% — signals continued softness through the autumn. Much depends on the Bank of England's rate trajectory; a base rate cut in the final quarter of the year would likely unlock pent-up demand, particularly among first-time buyers who have been priced out by mortgage affordability tests. Absent that, expect transaction volumes to remain 10-15% below the ten-year average, with regional markets outside the South East continuing to outperform on both sales activity and rental growth.

The clearest takeaway from July's data is that the UK housing market has entered a holding pattern defined by affordability constraints rather than a lack of underlying demand. Investors who treat this as a temporary lull rather than a structural decline — and who position capital towards higher-yielding regional markets and rental-focused development — stand to benefit disproportionately once mortgage rates ease and buyer confidence returns. Those exposed to lower-yield southern markets, by contrast, should brace for a longer period of price stagnation before momentum genuinely returns.