England and Wales housing market stalls as Middle East conflict fuels inflation worries

TL;DR: Buyer interest and agreed sales slipped in April, and agents expect the slowdown to continue while inflation and mortgage‑rate fears linger.

The Royal Institution of Chartered Surveyors (RICS) surveyed its members for the fourth consecutive month and found a clear softening in demand across England and Wales. Agents reported that buyers and sellers are increasingly cautious, citing uncertainty over inflation and interest rates that could rise as a result of the war in the Middle East.

In April, 34 % of respondents said new buyer inquiries had dropped compared with the previous month, a slight improvement from the 40 % net decline recorded in March but still a sign of weak market momentum. At the same time, 36 % of agents reported a fall in agreed sales, up from 35 % in March. The decline in sales and inquiries points to a market where affordability pressures are most acute in southern England and London.

Tarrant Parsons, head of market research and analysis at RICS, warned that activity and sentiment will stay subdued until inflation and borrowing costs find a clearer path. The Bank of England has already signalled that interest rates may need to rise further because higher oil and gas prices from the Middle East conflict are pushing inflation higher. Mortgage rates, which follow government bond yields, are expected to climb as borrowing costs rise.

The flow of new listings remained largely stagnant in April, and price pressure intensified. A net balance of 34 % of members saw house‑price declines over the past three months, a sharp swing from the -25 % reading a month earlier. Regional data show the steepest falls in London, the south‑east, East Anglia and the south‑west, while the north‑west and northern England still posted modest gains.

The rental sector tells a different story. Demand from new tenants rose, with 14 % of agents noting an increase over the past three months, even as landlords pull back from letting due to tighter regulation and higher taxes. Twenty‑five percent of respondents expect rents to climb in the coming months.

Savills, another major estate agent, echoed the RICS findings, reporting greater caution among buyers and sellers since the conflict began. The firm noted longer completion times and only a 1 % year‑on‑year rise in transactions for the first quarter.

What it means: With inflation and borrowing costs likely to stay volatile, the housing market is set to remain muted in the near term. Buyers appear more price‑sensitive, sellers are hesitant to list, and rental demand is outpacing supply. Watch for further interest‑rate moves by the Bank of England and any shifts in oil‑price volatility that could tip the balance in the coming months.