Iran Conflict Impacts UK Housing Market as Sales and Inquiries Decline
The UK housing market is experiencing a notable lack of momentum as persistent global and economic uncertainties continue to suppress home buyer sentiment. The Royal Institution of Chartered Surveyors (Rics) has reported that while the year began with some encouraging signs, confidence quickly weakened amid escalating concerns over inflation, rising interest rates, and broader international instability, such as the ongoing conflict in the Middle East.
Decline in Buyer Inquiries and Agreed Sales
New buyer inquiries saw a significant decline in February, with a net balance of 26 per cent of property professionals reporting a fall. This marks a deterioration from the 15 per cent recorded in January. Agreed sales also remained subdued, with a net balance of 12 per cent of professionals noting a decrease. Surveyors anticipate a continued dip in sales activity in the immediate future, reflecting the cautious mood among potential buyers.
Regional Variations in House Prices
House prices were broadly flat overall in February, with a net balance of 12 per cent of professionals reporting falls. However, there were substantial regional variations. Downward price pressure is particularly strong in London, the South East, and East Anglia. In contrast, Northern Ireland, Scotland, and the North West of England are still reporting firmer price trends, highlighting the uneven impact across the UK.
Long-Term Outlook and Mortgage Market Turbulence
Despite the near-term challenges, the long-term outlook appears more robust. A net balance of 17 per cent of professionals expect sales to rebound over the next 12 months, and 33 per cent anticipate house prices to edge higher in that period. However, in London, expectations for house prices in the next 12 months have cooled sharply, according to the report.
Mortgage lenders have been withdrawing deals and increasing their rates as swap rates have risen, with concerns about rising prices mounting amid the Middle East conflict. Financial information website Moneyfactscompare.co.uk noted that recent days have been some of the most turbulent in the UK mortgage market since the aftermath of the September 2022 mini-budget. Some average mortgage rates on the market have also flown past the 5 per cent mark as lenders scramble to adjust.
Supply and Rental Market Trends
On the supply side, new instructions remained broadly stable in February, indicating little immediate shift in the pipeline of new stock. In the lettings market, tenant demand was broadly stable over the three months to February, but landlord instructions were firmly negative, pointing to a shortage of rental homes. Professionals are expecting rents to rise overall in the next three months, adding pressure to the rental sector.
Expert Analysis on Market Volatility
Rics head of market research and analytics, Tarrant Parsons, commented on the findings, stating, "February's survey highlights renewed volatility in the market. While activity indicators at the start of the year suggested a tentative improvement, the deterioration in the geopolitical backdrop has clearly weighed on confidence. The recent rise in oil and energy prices has also increased the likelihood that mortgage rates will remain higher for longer. As a result, near-term expectations have softened. Although the 12-month outlook remains positive overall, maintaining that trajectory will depend on the recent spike in inflationary pressures easing in the months ahead."
This analysis underscores how external factors, such as the Iran conflict, are directly influencing domestic economic conditions, particularly in the housing and mortgage sectors. The interplay between global events and local market dynamics continues to shape the UK's property landscape, with buyers and sellers navigating a complex environment of uncertainty and change.
