UK house prices fall as Iran war uncertainty dampens demand

UK House Prices Dip Amid Middle East Conflict Concerns

UK property values experienced a slight decline in March, with an average drop of 0.5%, according to data from Halifax. The average price now stands at £299,677, marking a slowdown in annual growth. This trend follows a 0.3% increase in February, before the escalation of tensions in the Middle East. The conflict has raised energy costs, fueling worries that inflation could rise and interest rates might remain unchanged for the remainder of the year.

Mortgage Rates Rise, Dealing a Blow to Affordability

Recent weeks have seen mortgage rates surge, leading to the disappearance of hundreds of the most competitive deals. Last month witnessed the largest single-day withdrawal of offers since the 2022 mini-Budget, which was spearheaded by then-Prime Minister Liz Truss. However, Halifax noted that the current rate hikes are less severe than those observed four years ago, offering some relief to buyers.

“The housing market’s recent slowdown is largely due to lingering uncertainty about the Middle East conflict,” stated Amanda Bryden, head of mortgages at Halifax. “Higher energy prices have increased inflation expectations, which in turn have pushed mortgage rates upward. This has reduced confidence that rates will be cut this year and has tempered the initial momentum seen at the start of the year.”

Bryden also highlighted that the duration of weaker demand will depend on how long these pressures persist and their broader economic consequences, particularly regarding employment and inflation. While the market faces challenges, the situation remains fluid, with potential shifts based on evolving geopolitical and economic factors.