Potential headwinds forming as bond yields rise and shortage of rental properties persists
The UK residential property market continued to show signs of strength in October, with house prices rising and buyer demand holding steady, according to the Royal Institution of Chartered Surveyors (RICS).
Its latest UK Residential Market Survey recorded a net balance of +16% for house prices overall, with nearly all regions reporting growth. The exceptions were Yorkshire and the Humber, and the South West, which saw price declines of -23% and -4%, respectively.
New buyer enquiries posted a net balance of +12%, marking the fourth consecutive month of growing demand, reinforcing the upward price trend across most of the UK.
Looking ahead, survey respondents showed increased confidence in further price growth over the next three months, with expectations rising to +20% from +12% in September. Nearly all regions are projected to see price gains over the coming year, with particularly strong growth anticipated in Northern Ireland and Scotland.
In the rental market, however, the gap between supply and demand remains a challenge. Tenant demand grew with a net balance of +19% over the three months to October, while new landlord instructions continued to decline, hitting a net balance of -29% — the lowest level since late 2021. This shortage of available rental properties has led to a forecast of higher rental prices, with 33% of respondents expecting rents to rise over the next quarter.
October’s results were shaped in part by anticipation around Rachel Reeves’ Autumn Budget, which prompted a spike in bond yields that could weigh on the housing market in the months ahead. Respondents in several regions emphasised the need for “competitive pricing” to maintain sales activity in a potentially challenging financial environment
RICS president Tina Paillet (pictured left) noted that the Bank of England’s recent interest rate decisions could provide further support to the sales market. However, she warned that the expiration of the current higher stamp duty threshold in spring 2025 may drive a short-term rush among buyers, likely followed by a market slowdown once the deadline passes.
“Our data continues to indicate that renters are feeling the pressure from a limited supply of rental properties and rising rents,” Paillet said. “The Autumn Budget’s immediate stamp duty increases for landlords acquiring rental properties may increase opportunities in supply for owner-occupiers, but it will make it more challenging to address the critical shortage of rental homes.”
Tarrant Parsons (pictured right), RICS head of market analysis, added that buyer demand had helped boost sales activity in October and that forward-looking sentiment suggested this positive trend might continue. However, he cautioned that rising bond yields and higher interest rate expectations could present headwinds for the housing market in the short term.
“The UK housing market saw a continued pick-up in activity through October, with the recent improvement in buyer demand translating into growth in the number of sales being agreed,” Parsons said. “That said, the rise in bond yields following the Budget, alongside a general increase in financial market implied interest rate expectations over the past couple of weeks, will likely present something of a headwind for the market to contend with.”
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