Tarrant Parsons, RICS head of market research and analysis, said the market “is gradually finding its footing, with key activity indicators having become progressively less negative over recent months,” but cautioned that “any potential recovery remains fragile and faces two significant near-term tests.” He pointed to the Bank of England‘s “increasingly hawkish tone” amid renewed energy-market volatility, alongside speculation ahead of the October Budget over potential changes to property taxation.
For brokers, the rate backdrop remains a key constraint on affordability. Moneyfacts’ early-September data puts the average rate across all residential mortgage types at roughly 5.55%, with typical two- and five-year fixes both above 5.6%, while lender stress tests still assume interest rates of 7% to 8.5% when assessing affordability – a factor that continues to cap how much many buyers can borrow even as demand recovers.
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said a modest uptick in demand coincided with holiday returnees restarting property searches, “albeit not in the same volume as this time last year.” He added that buyers and sellers are “finding it difficult to shrug off worries about the impact of the protracted war in Iran on the cost of living and mortgage rates in particular,” with Budget-related tax speculation adding to buyer caution.
Tom Bill, head of UK residential research at Knight Frank, offered a similar independent read on the market, noting demand had stabilised “as borrowing costs reset” and pointing to the government’s efforts to avoid stoking the pre-Budget speculation that has weighed on buyers in past years.
On the lettings side, RICS data show the net balance of respondents expecting rents to rise over the next three months jumped from +33% in July to +44% in August, with rents expected to rise by around 3% over the next 12 months. Leaf said continuing uncertainty in the sales market had pushed more activity into lettings, with tenants “taking advantage of their new ability to end fixed-term constraints under the Renters’ Rights Act.” He added that rents have held firm, supported by supply shortages – particularly of larger flats and family houses – as departing landlords are not being replaced quickly enough, allowing standards to slip.
