Higher borrowing costs and negative sentiment from the Middle East conflict are hitting housebuyer confidence and sales, the latest survey from the Royal Institution of Chartered Surveyors (RICS) shows.

New buyer enquiries dropped to a net balance of -39% in March, the survey said, down from -29% in February.

This is the lowest net balance since August 2023, RICS said.

The net balance is the proportion of survey respondents that report a rise versus those reporting a fall.

Agreed house sales also fell, dropping to -34% from -13% in February. 

Short-term house sales expectations dropped sharply to -33%, compared with -4% in February.

Over the next 12 months, sales expectations fell to -1%, suggesting a broadly flat market rather than expectations of market growth before the Middle East conflict began.

The headline price balance for house sales fell to -23% in March, a drop from -14% and -10% in the two months previously.

Expectations for the next three months fell to -43%, while the 12-month outlook dropped to 2%.

London, the South East, East Anglia and the South West all showed weaker price readings than the UK average.

Scotland and Northern Ireland continued to report increasing house prices.

RICS head of market research and analysis Tarrant Parsons 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.”