The UK housing market is showing the first tentative signs of recovery after a prolonged period of stagnation, according to a report released today by the Royal Institution of Chartered Surveyors (RICS). While demand remains subdued, surveyors are reporting increased optimism and a lessening of negative trends in key indicators, offering a glimmer of hope after months of uncertainty.
The RICS survey, conducted in January, revealed that a net balance of 35% of its members anticipate an increase in house sales over the next 12 months – the highest level of optimism seen since December 2024. This positive outlook follows a period of significant slowdown triggered by anxieties surrounding the autumn budget and broader economic pressures. Estate agents and surveyors had previously reported a considerable cooling in activity leading up to the budget announcement in late November, fueled by speculation about potential changes to property taxes, including stamp duty and capital gains tax.
However, the recovery remains fragile. While the decline in new buyer inquiries has slowed – with a net balance of -15% reporting a decrease in January, compared to -21% in December and -29% in November – demand is still down overall. Similarly, agreed sales, while improving, remain negative, with a net balance of -9%, the least negative reading since June 2025.
Perhaps the most encouraging signal comes from house prices, which RICS suggests may have reached a “potential turning point.” Although a net balance of -10% of surveyors still reported falling prices over the past three months, this represents an improvement from the low of -19% recorded in October. This suggests the rate of price decline is slowing, and a stabilization – or even modest growth – could be on the horizon.
Simon Rubinsohn, Chief Economist at RICS, cautioned that any recovery is likely to be “gradual.” “There are early signs that market conditions may be improving after a challenging period, although activity levels are still subdued,” he stated. “Whether this tentative improvement develops into sustained momentum will depend heavily on the trajectory of mortgage rates and broader macro confidence over the coming months.”
The impact of the autumn budget appears to have been a key factor in the recent shift. Fears of increased property taxes, which ultimately did not materialize, had contributed to a freeze in activity as potential buyers and sellers waited for clarity. The subsequent easing of uncertainty has likely prompted some return to the market, although broader economic concerns continue to weigh on sentiment.
These concerns are reflected in the recent financial results of major housebuilders. Barratt Redrow, the UK’s largest housebuilder, announced a 13.6% drop in underlying pre-tax profits to £199.9 million for the six months ending December , and subsequently cut its dividend. The company cited “low consumer confidence, high economic and political uncertainty, and affordability challenges” as contributing factors. Barratt Redrow completed 7,444 homes during the period and anticipates completing between 17,200 and 17,800 homes for the full year.
Bellway, another significant player in the UK housing market, also reported “subdued” activity in the autumn, attributing it to uncertainty surrounding the government’s budget. The company completed 4,702 homes in the six months to January , a 2.7% increase from the 4,577 homes completed in the same period last year.
The current situation highlights the sensitivity of the housing market to both economic conditions and government policy. While the tentative signs of recovery are welcome, the path forward remains uncertain. Mortgage rates, inflation, and overall economic confidence will be crucial determinants of whether this improvement translates into a sustained upturn. The RICS survey suggests a cautious optimism is emerging, but the market remains vulnerable to external shocks and shifts in consumer sentiment.
The subdued activity experienced by major developers like Barratt Redrow and Bellway underscores the challenges facing the sector. Reduced profitability and cautious outlooks suggest that housebuilding activity may remain constrained in the near term, potentially exacerbating the existing housing shortage. The interplay between demand, supply, and economic conditions will continue to shape the trajectory of the UK housing market in the months ahead.
