RICS: How Iran conflict has shifted UK housing market mood

New buyer enquiries are approaching a three-year low amid the Iran war and concerns about rising inflation, the Royal Institution of Chartered Surveyors (RICS) has warned.

The latest RICS UK Residential Survey for March 2026 found the market losing momentum as rising borrowing costs and wider geopolitical uncertainty weighed heavily on buyer confidence and sales activity.

New buyer enquiries fell to a net balance of -39%, down from -29% in February, marking the weakest reading since August 2023.

Agreed sales also deteriorated, dropping to a net balance of -34% from -13% the previous month.

The survey points to a market increasingly pressured by inflationary concerns and higher mortgage costs, RICS said.

Short-term sales expectations fell sharply to -33%, compared with -4% in February, suggesting respondents expect activity to weaken further over the coming months. Looking 12 months ahead, sales expectations slipped to -1%, indicating a broadly flat market rather than the modest recovery view seen previously.

House prices also showed renewed signs of softening. The headline price balance fell to -23% in March, down from -14% and -10% in the prior two months, signalling broader downward pressure on values.

Expectations for the next three months weakened markedly to -43%, while the 12-month outlook edged down to +2%, pointing to little overall price growth over the year ahead.

Regionally, London, East Anglia, the South East and the South West all posted weaker price readings than the national average, while Scotland and Northern Ireland continued to report rising prices. On the supply side, new instructions remained subdued at -6%, and unsold stock on estate agents’ books rose to an average of 47 properties, up from around 45 at the start of the year.

Tarrant Parsons, head of market research and analysis for RICS, said:

“The mood across the UK housing market has shifted markedly over the past couple of months.

“What had been a cautiously improving picture for activity has been knocked off course by the wider macro fallout from the Middle East conflict, as the renewed deterioration in the mortgage rate outlook has proved particularly challenging.

“Indeed, with average fixed rates climbing back above 5% according to some sources, it is unsurprising that buyer demand has softened.The path ahead hinges on whether or not recent surges in oil and energy costs begin to reverse in what remains a highly uncertain geopolitical environment.“

Commenting on the report, Tom Bill, head of UK residential research at Knight Frank, said:

“Sentiment in the UK housing market will improve if the two-week ceasefire in the Middle East holds, supporting transaction levels as the spring market gets underway.

“However, mortgage rates won’t snap back to where they were in February due to the longer-term inflationary impact of the war and the associated vulnerability of the government’s financial position, which will keep house prices in check.”

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