UK house prices fall at fastest pace since 2023 as Iran war hits sentiment

The RICS UK house price balance fell to -34 in April from -25 in March, the weakest reading since November 2023, as Iran war fallout and rising mortgage rate expectations weighed on buyer sentiment. As an aside, eyes are on UK politics: UK Starmer: Has made clear to allies, he will stand & fight if Streeting triggers contest. But, some data to focus on due latet: Info via Reuters. Summary: The RICS headline house price net balance fell to -34 in April from a downwardly revised -25 in March, the weakest reading since November 2023 and well below the Reuters poll forecast of -26, according to the Royal Institution of Chartered Surveyors Gauges of new buyer enquiries and near-term price expectations edged slightly higher but remained in negative territory RICS head of research Tarrant Parsons warned that Bank of England signals on potential rate hikes, driven by elevated oil prices and disrupted supply chains, are compounding the already difficult environment for buyers Financial markets were pricing in two to three quarter-point BoE rate increases before year-end as of Wednesday, a key driver of mortgage rate expectations Affordability pressures were described as most acute in London and southern England, with activity and sentiment expected to stay subdued until the inflation and borrowing cost outlook clarifies Rents continued to rise sharply in April, with landlord instructions falling, though by a smaller margin than in March Sentiment in Britain's housing market deteriorated sharply in April, with the RICS house price balance sliding to its weakest level in nearly two and a half years as the economic fallout from the Iran war and the prospect of higher interest rates bear down on buyers. The Royal Institution of Chartered Surveyors reported a net balance of -34 for April, down from a downwardly revised -25 in March and the lowest reading since November 2023. The result came in well below the Reuters consensus forecast of -26, suggesting the market is weakening faster than analysts had anticipated. While measures of new buyer enquiries and short-term price expectations nudged slightly higher on the month, both remained firmly in negative territory. Tarrant Parsons, RICS' head of research and analysis, pointed directly to the Bank of England as a source of additional pressure. Recent warnings from the central bank that interest rate increases may be needed to contain renewed inflation, itself driven by elevated oil prices and disrupted supply chains stemming from the Iran conflict, are heightening uncertainty for prospective buyers and dampening activity across the market. Parsons said that until a clearer path emerges for both inflation and borrowing costs, sentiment is likely to stay subdued, with London and southern England facing the sharpest affordability constraints. Financial markets were by Wednesday pricing in two to three quarter-point BoE rate hikes before the end of the year, a development with direct implications for mortgage pricing and, by extension, housing demand. The RICS data arrived against a backdrop of conflicting signals from mortgage lenders, with Nationwide and Halifax pointing in different directions on house prices in April, adding to the difficulty of forming a clear view on near-term market direction. In the rental market, conditions remain tight. Landlord instructions continued to contract in April, keeping upward pressure on rents, though the pace of that contraction eased compared with March. --- The sharp deterioration in the RICS balance, combined with financial markets now pricing in two to three Bank of England rate hikes before year-end, points to a prolonged period of housing market weakness in the UK. Rising mortgage rates, themselves a function of elevated oil prices and supply chain disruption from the Iran war, are compressing affordability at a time when consumer confidence is already fragile. For energy markets, a weakening UK housing sector signals broader demand-side stress in one