Sales Soften Amid Global Uncertainty While Demand Shifts to the Rental Market
Chestertons survey shows 21% fall in enquiries in March, but existing buyers press on amid tight supply
Sales activity has softened amid war and global uncertainty, with March enquiries down 21% YoY as some buyers adopt a more cautious, ‘wait and see’ approach.
However, this has not translated into a loss of committed demand, with those already in the market continuing to progress. New offers are now just 6.7% down year-on-year, a marked improvement from a 40% decline in January, pointing to stabilising buyer intent following the post-Budget period.
In addition, the lettings market has seen an upturn in enquiries, with upward pressure on rents as demand strengthens and supply tightens.
Economy and Politics: Post-budget sales bounce interrupted by war, but Bank of England advises calm.
The better than expected 0.5% rise in GDP and fall in unemployment to 4.9% in February points to a return of economic activity after pre-Budget uncertainty, with inflation broadly stable.
Iran conflict sparks inflation volatility, but Bank of England holds its rate and warns markets not to ‘get ahead of themselves’.
After stabilising at 3% in February, March inflation rose to 3.3% as expected. But this was mainly due to petrol prices which have been volatile, and the Bank of England is now expected to hold rates on 30 April.
Five-year fixed-rate mortgages rose from 4.94% to 5.75%, although some lenders are already offering more competitive products as the market begins to stabilise.
Political uncertainty ahead of the 7 May local elections is likely to weigh on buyer sentiment in the short term, with some delaying decisions.
Sales Price Trends: Short-term softening amid geopolitical and rate uncertainty, with affordability improving.
RICS reports short-term weakness as enquiries fall but expects 2–3% annual growth.
Rightmove records 0.8% MoM rise in April but 0.9% YoY fall; London and the South softer, other regions rise.
UK affordability has improved to 5.6x earnings, from 6.9x in 2022 (London, 8.8x from 11.1x).
Market Supply and Demand: Chestertons survey shows fall in enquiries, but existing buyers press on amid tight supply.
Portal sales enquiries fall 21% YoY in March as buyers adopt a ‘wait and see’ stance on outlook for war and mortgage rates.
But buyers who started process post-Budget press on, with only 6.7% YoY fall in new offers during March (compared to -40% in January).
On the supply side, instructions have fallen 14% and available properties by 4.5%, according to the monthly survey.
Residential development volumes have collapsed in London to a post-war low, exacerbating supply side.
What’s Going to Happen in Next Quarter? An early resolution to geopolitical conflict could boost market recovery.
While geopolitical tensions softened sales activity, lenders have already started to reduce rates after a brief spike, signalling confidence that borrowing costs will stabilise rather than rise further.
With affordability improving, this points to the potential for a relatively quick rebound in demand once conditions settle.
The Chestertons View: While there is short-term sensitivity to turmoil, London remains a safe global haven.
In the short term, the capital has shown sensitivity to recent geopolitical and economic volatility, with some buyers adopting a more cautious, ‘wait and see’ approach. This has led to a fall in enquiries, but has not displaced underlying demand, with committed buyers continuing to progress where pricing reflects current conditions.
Encouragingly, new offers have improved significantly from earlier in the year, pointing to stabilising buyer intent following the post-Budget slowdown. With affordability improving and supply remaining constrained, the market is well placed for a relatively swift recovery as confidence returns.
Current conditions are offering buyers a window of opportunity, with more negotiable pricing following recent market uncertainty. However, this may be short-lived, as improved affordability and stabilising mortgage rates could support a quicker return of competition once confidence improves.
Sales Prices:
Average property price trends for London in January 2025:
January
Prime Central: £1,055, 554 which is -10.8 YoY
Greater London £554, 422 which is -1.7% YoY
February
Prime Central: £ 1,048,817 which is -11.8% YoY/ +1.5% MoM
Greater London: £ 542,304 which is -3.3% YoY/ -1.9% MoM
Rental Market Trades on Uncertainty
Lettings activity strengthens, with viewings up 4.1% year-on-year and offers rising 15% month-on-month
The ‘wait and see’ approach evident in the sales market since the start of the war has benefited landlords with would-be first-time buyers opting to stay in rental properties while mortgage costs have been rising, with many products being withdrawn since the start of hostilities.
Lettings Market: Sales market pause supports short-term rebound in rental market.
Q3 RICS survey shows first increase in tenant demand for three quarters, with uptick in rent expectations.
Chestertons survey showed viewings rose 4.1% YoY in March and offers were up 15%.
Media reports indicate increase in interest from Middle East in at least short-term lettings at strong prices.
Supply has been shrinking as many landlords sell properties in the face of tax pressure and the Renters’ Reform Act, tightening availability and driving stronger competition for well-priced properties.
The Chestertons View: With a strong lettings market, landlords can be confident in demand as the Renters’ Rights Act takes effect
The lettings market is buoyed by uncertainty in the sales market, with would-be buyers remaining in the rental sector for longer. This has led to more active tenant demand, with viewings and offers increasing, and competition for available properties intensifying.
At the same time, supply continues to tighten, partly driven by landlords exiting the market ahead of the Renters’ Rights Act. As a result, conditions remain firmly in landlords’ favour, with strong levels of demand expected to continue in the short term.