The latest indicators from HMRC and Nationwide paint a positive picture of the housing market, but experts warn the figures “set an ominous tone” as the Middle East conflict slows economic growth.
Seasonally adjusted UK monthly residential property transaction figures from HMRC show a 6% increase on January’s figures, with 102,410 transactions. Although the figures are 6% down year-on-year, levels were elevated in February 2025 ahead of the April changes to SDLT thresholds.
Nationwide’s house price index for March is similarly positive, with UK annual house price growth up to 2.2% in March from 1% in February.
But experts warn the figures merely reflect the calm before the storm, as affordability pressures begin to reflect on market volumes.
“Today’s decrease in property transaction volumes sets an ominous tone for the market, as dark clouds gather on the horizon,” said Andrew Lloyd, managing director at property data firm Search Acumen.
“The conflict in the Middle East does not seem to be near resolution and the economic effects are already accelerating, despite not being completely captured in this data.
“Whilst January and February are not typically active times for completions, the decline in volume of residential transactions from the same period last year makes a typical Spring bounce look worlds away, as consumer confidence wanes.
“The US, as a market indicator of what we might expect to see in the coming weeks, shows increasing affordability pressures as mortgage rates there surge to 6.38%, causing overall house sale volumes to fall.
“If we see geopolitical tensions ease and inflation hold, we may see transactions rebound. But as we know, uncertainty is a market killer. What is more likely is that the market volatility we’ve witnessed in recent weeks will become more evident in datasets next month, as deals sit on their hands and buyers wait.”
Commenting on Nationwide’s figures, the building society’s chief economist Robert Gardner offered a similar warning.
“The pickup in house price growth suggests that the market had regained momentum after the slowdown recorded around the turn of the year,” he said.
“However, the sharp rise in global energy prices in response to developments in the Middle East represents a significant 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 impact will depend on the duration of the shock as well as the policy response. The outlook for interest rates is particularly uncertain and dependent on whether the demand or supply side of the economy is more adversely affected.
“Nevertheless, financial market expectations for the future path of Bank Rate have shifted dramatically. Towards the end of March, three interest rate increases were priced in over the next twelve months, compared to two rate cuts being anticipated before the strikes on Iran. This shift has resulted in a sharp rise in longer term interest rates (swap rates) that underpin fixed rate mortgage pricing.
“If sustained, this could reverse some of the improvement in housing affordability that has taken place in recent years. With consumer sentiment also likely to be dented by the uncertain outlook and the prospect of rising energy costs, housing market activity is likely to soften.”
Nathan Emerson, CEO at Propertymark, acknowledged the positive increase in HMRC’s February transactions but agreed conditions could wane. While HMRC’s figures indicate underlying demand, the ongoing conflict risks destabilising the market, he said.
“While activity has picked up, there remains a delicate balance between demand and affordability. Maintaining buyer confidence, ensuring mortgage products remain accessible, and supporting affordability will be key to sustaining momentum and preventing a slowdown as the year progresses.”
Commenting on Nationwide’s figures, Emerson said the upward movement must be viewed in context. “Affordability remains stretched by historical standards, and any renewed pressure on inflation that may also affect base rate decisions could quickly temper this momentum.”
Other commentators offered a slightly more optimistic interpretation. “February’s HMRC property transactions data points to a housing market that remains resilient,” said Nick Leeming, chairman of Jackson-Stops. “Activity levels suggest a measured start to the year, with buyers proceeding thoughtfully as mortgage rates continue to fluctuate, encouraging a more considered and deliberate approach to decision-making.
“Across our network, we have recorded a noticeable increase in new instructions, particularly in coastal locations and well-connected commuter hotspots. Branches such as Newmarket and Taunton have seen property instructions more than double month-on-month, reflecting growing seller confidence as we move toward the spring market.”
Jason Tebb, president of OnTheMarket, said Nationwide’s figures reflect a pragmatic approach from buyers and sellers.
“This data shows just how much market activity and sentiment continued to pick up at the start of this year, with buyers and sellers proceeding with their moves with more clarity and confidence,” he said.
“Those who have already delayed the decision to move for various reasons are actively engaged in the market and are pressing on despite the Middle East conflict, with our own property sentiment index showing that buyers and sellers are adopting a more pragmatic outlook rather than a loss of confidence.”
