The latest figures from HMRC and Nationwide paint a positive picture for the housing market, but experts warn the figures “set an alarming tone” as the Middle East conflict slows economic growth.
The revised monthly UK residential property sales figures from HMRC show a 6% increase on January’s figures, at 102,410. Although the numbers are down 6% year-on-year, levels rose in February 2025 ahead of April’s changes to SDLT.
The national house price index for March is also positive, with UK annual prices growing to 2.2% in March from 1% in February.
But experts warn that the figures show the calm before the storm, as lower price pressures are beginning to show in markets.
Andrew Lloyd, managing director of property data firm Search Acumen, said: “Today’s slowdown in property sales is creating a sense of dread in the market, as dark clouds gather.
“The conflict in the Middle East does not seem to be close to being resolved and the economic consequences are already increasing, although they are not fully known in this information.
“While January and February are not usually the times of completion, the decline in the number of home sales from the same period last year makes the usual Spring boom look far from the world, as consumer confidence continues to wane.
“The US, as a market indicator of what we can expect to see in the coming weeks, is showing increasing pressures on affordability as mortgage rates rise to 6.38%, causing real estate prices to fall.
“If we see political tension ease and inflation pick up, we may see activity pick up. But as we know, uncertainty is the market. There’s a chance that the market volatility we’ve seen in recent weeks will be more visible in the datasets next month, as deals sit in their hands and buyers wait.”
Commenting on the Nationwide figures, the construction industry’s chief economist Robert Gardner issued a similar warning.
He said: “The increase in house prices suggests that the market has recovered after the slowdown recorded towards the end of the year.”
“However, the sharp rise in global energy prices due to developments in the Middle East indicates a major shock to the global economy, clouding the outlook.
“In the near term, UK economic growth is likely to be slower and inflation higher than previously expected, although ultimately the outcome will depend on the timing of the shock as well as the policy response. The outlook for interest rates is not particularly stable and depends on whether the demand side or the supply side of the economy is more adversely affected.
“However, the expectations of the financial market for the future direction of the Bank Rate have changed significantly. Towards the end of March, three interest rates were purchased during the next twelve months, compared to two reductions expected before the attack on Iran began.
If sustained, this could prevent another improvement in house prices that has occurred in recent years. As consumer sentiment is likely to be dampened by the uncertain outlook and the prospect of rising electricity costs, the housing market is likely to weaken.”
Nathan Emerson, CEO at Propertymark, welcomed the positive increase in HMRC transactions for January but agreed levels could be reduced. While HMRC figures show underlying demand, ongoing disputes could damage the market, he said.
“Although the process continues, there is still a balance between demand and affordability. Maintaining consumer confidence, ensuring that credit products remain available, and supporting affordability will be key to maintaining momentum and preventing a downturn as the year progresses.”
Referring to the Statewide numbers, Emerson said the upward trend must be viewed in context. “Purchasing capacity remains stretched by historical rates, and any renewed inflationary pressures that could also affect lower-level decisions could quickly upset this rate.”
Some commentators have offered a more optimistic explanation. “HMRC’s property sales data for February points to a housing market that remains strong,” said Nick Leeming, chairman of Jackson-Stop. “Activity levels suggest a measured start to the year, with consumers moving forward in a more thoughtful manner as mortgage rates fall, encouraging a more considered and determined approach to decision-making.
“Across our network, we have reported a notable increase in new orders, particularly in coastal areas and well-connected tourist areas. Branches such as Newmarket and Taunton have seen orders for properties more than double month-on-month, which reflects the growing confidence of retailers as we head into the spring market.”
Jason Tebb, president of OnTheMarket, said the Nationwide figures show a consistent trend from buyers and sellers.
“These data show how the market’s performance and sentiment continues to be at the beginning of this year, as buyers and sellers continue their movements with clarity and confidence,” he said.
“Those who have delayed making the decision to move for a variety of reasons are deeply immersed in the market and are continuing despite the conflict in the Middle East, with our inventory of property sentiment showing that buyers and sellers are taking a positive view rather than losing confidence.”
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