The UK housing market cooled again in August as buyers pulled back and prices slipped across most regions, according to the latest survey from the Royal Institution of Chartered Surveyors (RICS). At the same time, dwindling supply in the lettings market threatens to push rents higher, intensifying pressure on tenants while offering landlords the prospect of stronger yields.
Buyer demand falters
The August RICS Residential Market Survey painted a picture of weaker sentiment across the sales market. New buyer enquiries recorded a net balance of -17%, down sharply from -7% in July, pointing to a faster slowdown in demand. Agreed sales also fell, with a reading of -24%.
House prices declined at the national level, with some regions registering steep drops. East Anglia (-64%) and the South West (-46%) saw the sharpest net balances, while Northern Ireland stood out as an exception, reporting continued price growth despite the wider cooling trend.
Emma Cox, Managing Director of Real Estate at Shawbrook, warned that uncertainty was prompting buyers to sit on the sidelines. “The property market is continuing to see a lull in activity, with a further drop in house prices in this buyers’ market,” she said. “Most are employing a ‘wait-and-see’ strategy, which could bring the market to a standstill until any property tax changes are ruled out.”
For buy-to-let investors, softer prices in southern regions may present opportunities, but the attraction is tempered by higher borrowing costs and political uncertainty. Analysts say the interplay between rising mortgage rates and potential reforms to property taxation is shaping investor caution.
Rental stock dries up
While sales soften, conditions in the lettings market remain tight. The RICS survey found new landlord instructions fell to a net balance of -37%, marking the weakest level since April 2020. Tenant demand, by contrast, held steady at +5%, and a net balance of +27% of respondents expect rents to rise over the coming three months. On an annual basis, rents are forecast to grow by around 3% nationwide.
Russell Anderson, Commercial Director of Mortgages at Paragon Bank, said the imbalance between supply and demand is worsening. “A decline in landlord instructions is further evidence that supply is failing to meet the continuing demand for privately rented homes,” he said. “We need to ensure that investment in the private rented sector remains viable, creating an environment where landlords feel confident to grow and maintain their portfolios.”
Investors weigh risk and reward
For landlords, the tightening rental market offers the potential for stronger yields. Yet the backdrop of elevated borrowing costs and political debate around housing policy means confidence remains fragile.
Market analysts note that the North of England and parts of the Midlands may offer the best value for investors seeking resilient yields, while regions in the South risk further price declines. However, with the Chancellor’s Budget on the horizon, the prospect of new property tax measures is likely to keep many investors cautious in the months ahead.
With sales slowing and rental markets under strain, the RICS data highlight a housing sector facing diverging pressures — weaker demand from buyers, but unrelenting competition among tenants. For policymakers, the figures raise fresh questions about how to balance affordability with investment confidence in a housing market still in flux.