RICS: The housing market was muted in May, but as sales level off, the outlook gets better

Following the stamp duty hike in April, the real estate market lost steam, but sentiment is now improving

Following the stamp duty hike in April, the housing market is still muted, with more sellers than buyers, according to the most recent Royal Institute of Chartered Surveyors (RICS) survey.

According to the report, while home prices remained relatively stable last month, real estate brokers reported a decline in new buyer inquiries.

RICS notes that "sentiment around the near-term outlook is showing tentative signs of improvement" and that there are indications that "the worst may be over for now."

In contrast to the muted real estate market, Zoopla reported the most agreed-upon property sales in four years in May. However, according to the property portal, in order to get a deal, sellers were sometimes forced to reduce their asking price by sixteen thousand dollars.

The stamp duty changes at the end of March, according to RICS, are still having an impact on buyer activity, and the housing market is facing challenges in the future due to interest rate uncertainty and uncertainty surrounding global trade policies.

Nevertheless, the organization had high hopes for the housing policies that were revealed in the Spending Review. The government's commitment to a longer-term affordable housing settlement should increase supply, support overall economic stability, and improve the functioning of the real estate market, according to Simon Rubinsohn, chief economist at RICS.

What is the state of the real estate market?

Buyer demand and sales activity are still in the negative, according to RICS. Survey respondents, including surveyors and estate agents, reported a decline in new buyer inquiries in May, with a net balance of -26 percent.

The number is marginally less pessimistic than in March and April, but it still represents the fifth consecutive month of decline. Additionally, agreed sales are still slightly declining, resulting in a -28 percent net balance.

There is a growing trend of new instructions entering the market on the supply side. For the eleventh consecutive month, new listings increased, with a net balance of +7% of respondents. A possible more active summer market is indicated by the fact that valuation activity also increased, with +19 percent reporting an increase in appraisals over the previous year.

Senior economist Tarrant Parsons of RICS said: "Ongoing uncertainty about international trade policies and the dampening effect of transactions being brought forward ahead of the stamp duty changes at the end of March continue to weigh on buyer activity, causing sentiment to remain somewhat subdued across the UK residential property market.

"But short-term sales projections are stabilizing, indicating that even though muted conditions might last for a while, a further decline seems improbable.

"The outlook is more positive going forward, with respondents expecting a slow recovery in sales activity over the course of the following 12 months.

The highest number since February indicates that 25% of RICS respondents expect sales volumes to rise over the next 12 months.

How do house prices look?

According to RICS, the picture of home prices has not changed much. Despite declining to -8 percent in May from -3 percent in April, the national net balance still points to a generally flat market. A net balance of +34 percent of respondents anticipate that house prices will increase over the next 12 months, keeping price expectations in the positive range.

According to Halifax's most recent home price index, the average price of a home in the UK fell by 0.4 percent (about 1,150) in May, to 296,648.

In the year ending in the fourth quarter of 2025, Capital Economics predicts that home prices will increase by 3 to 5 percent. The consultancy's UK economist, Alex Kerr, cautions that the "recent soft patch for house prices is more than just a stamp duty-induced, temporary blip."

He continued by saying, "House prices on the Halifax measure fell in four of the six months to May and April's mortgage approvals suggest a significant increase in transactions is not in the pipeline."

"It seems more likely that the recent weakness is due to the softer outlook for the economy and employment rather than short-term stamp duty influences if there isn't a significant recovery in housing demand in the coming months.

This implies that it might take a little longer than we currently expect for housing transactions to recover from 64,700 in April to their pre-pandemic average of 100,000 per month. Furthermore, the growth in house prices might be a little slower than the 35% growth we predicted above consensus.

Due to low buyer demand, sellers may have to lower their prices, "especially if the plan is to move before the Autumn Budget potentially puts another dent in confidence," according to Tom Bill, head of UK residential research at Knight Frank.

Jeremy Leaf, a former residential chairman of RICS and an estate agent in north London, continues: "Previous transactions are longer but aren't going through. Even more in charge, buyers are haggling hard and taking their time before selecting an impressive selection of properties, especially apartments.