The impact on the housing market

History told us to expect a knock-on impact on housing markets, with buyers becoming more cautious and more likely to sit on their hands when they would normally be taking advantage of a spring buying season.

That may not look as severe now as it did then, with an audible sigh of relief evident on my commute out of London on Wednesday evening as news filtered through of a softening in Donald Trump’s stance. But, despite a 90-day pause in the imposition of the highest tariff rates in most circumstances, we are still left in a position of triple-digit tariffs between the US and China and 10% tariffs on US imports from other countries.

And, while that effectively means “no change” for the UK, it does – for the moment at least – mean an erosion of the relative advantage it held over more heavily tariffed trade partners (using the word partner in its loosest possible sense). 

It has to be hoped that the experience of the last week – not least in the US bond market – leads to a more rational, pragmatic and expedient negotiation of future trade terms, which lessens the global economic impact and potential feed through to the UK housing market.

But it is highly unlikely that we will see a zen-like calm return this spring, given the sheer unpredictability around what will happen next.

Consumer confidence and price sensitivity

So, it is still highly likely, if not inevitable, that there will be an impact on consumer confidence, meaning buyer sentiment remains relatively fragile. In this regard, the RICS Residential Market survey reported a further weakening in that sentiment over March even before Trump made his “declaration of economic independence”. Their reading of the balance of opinion on new buyer enquiries fell to -32 in the month, having moved into relatively modest positive territory in the second half of last year.

This suggests we are set for more price sensitivity over the next 90 days, particularly at the top end of the housing market given the bruising experience of recent stock market volatility, prospects for future wealth generation and uncertainty about what this could mean for future tax policies. 

Overall this points to a needs-based market in the short term, where committed buyers and sellers come to the fore and demand for “best in class” remains most resilient.

Given the relative security of UK bricks and mortar compared to other asset classes, we should see that supplemented by some more opportunistic and safe haven investment into the UK.

Furthermore, while the impetus for central banks to cut interest rates further and faster might not be the same as it was 48 hours ago, it is still more than it was 48 days ago.

So we continue to expect interest rates to fall over the summer and mortgage markets to become more competitive. That should mean an easing in underlying affordability, gradually bringing more buyers into the market and underpinning prices over the medium term.

Of course, all of the above makes it harder for the government to hit an already ambitious housebuilding target. It increases the pressure to find some kind of targeted demand stimulus for first-time buyers or affordable housing providers to give it a chance of translating recent planning reforms into the delivery of more homes.

And that brings us back full circle to politics, albeit of a more domestic nature.

Posted on the 10th of April 2025.

Further information

Contact Lucian Cook