UK house prices fall as Iran war uncertainty dampens demand

UK house prices fall as Iran war uncertainty dampens demand

Halifax reports a 0.5% decline in UK property prices during March, citing the ongoing Iran conflict as a key factor. The average price for homes now stands at £299,677, with annual growth slowing further. This marks a reversal of the 0.3% increase recorded in February, prior to the conflict’s escalation, which had already spiked energy costs and raised concerns about inflation.

Mortgage rates have surged in recent weeks, causing hundreds of the most affordable deals to vanish. The recent withdrawal of deals has reached its highest daily level since the 2022 mini-Budget under Prime Minister Liz Truss, which was widely criticized for destabilizing financial markets. However, Halifax notes that the current rise in rates is less steep than the dramatic increases seen four years ago.

Market confidence shaken by inflation fears

Amanda Bryden, head of mortgages at Halifax, explained that the housing market’s recent slowdown is linked to the uncertainty surrounding the Middle East conflict. “The impact of the war has increased anxiety about energy prices, which in turn has raised inflation expectations,” she said. “This has led to higher mortgage rates, reducing confidence that interest rates will be cut this year and slowing the momentum observed at the start of 2024.”

“The duration of weaker demand will largely depend on how long these pressures persist and their broader effects on the economy and employment,” Bryden added.

The lender’s analysis highlights a delicate balance between geopolitical tensions and domestic economic factors, with the housing market reacting to both. As the conflict continues, its influence on buyer behavior and market stability remains a focal point for analysts and policymakers alike.