How the Iran war is affecting the UK housing market
Caution reigns supreme in the UK housing market, with demand weakening due to the ongoing conflict in the Middle East.
This is according to the latest data from online property platform Zoopla, which found that UK house sales remain steady but cautious in the face of uncertainty linked to events in the Middle East.
Zoopla noted that the market is increasingly being driven by a smaller group of committed buyers, with some households delaying moving decisions, leading to weaker buyer demand.
In the first three months of this year, buyer demand has been running below last year’s levels, and they have weakened even more in March due to the impact of events in the Middle East.
Compared to the same time last year, buyer enquiries are now 13% lower, which Zoopla ascribes to potential buyers adopting a ‘wait and see’ approach to any market shocks that may arise from the conflict between Iran and the US and Israel.
The conflict also spells bad news for mortgages. Average mortgage rates have increased by 0.4 percentage points in the last month, and many sub-4% deals have been withdrawn as banks adjust to uncertainty over the inflation outlook.
The number of sales remains relatively stable, even if fewer potential buyers are looking to purchase homes, and a quarter of transactions are cash purchases, which aren’t sensitive to the rising mortgage rates.
House price growth is uneven
Overall, UK house prices rose by around 1.3% compared to the same time last year, although this figure varies significantly at a more local level.
In London and the South East, for example, the average price of a house has declined by 0.2% year-on-year, while in Northern Ireland, house prices have soared by 7.2%. Regions such as Scotland and the North West saw more modest but notable growth of 2.6% and 2.8%, respectively.
Zoopla said it does not expect house price growth to slow in the near term, but noted that this depends on demand remaining stable in the coming months. If geopolitical factors were to lead to a further decline in buyer demand, then we could see a price impact in the UK housing market.
“The market remains active, but is becoming increasingly reliant on a smaller pool of serious buyers,” said Zoopla executive director Richard Donnell.
“Some early-stage buyers are adopting a wait-and-see approach, but there is a sizable group of committed buyers who are pressing ahead with housing purchases.”
“If mortgage rates stabilise at current levels, we expect sales activity to continue to hold up well compared to last year. Further increases in borrowing costs could weaken demand and impact sales volumes later in the year,” he said.
“For buyers, there is less competition and more choice, but affordability is becoming more stretched. For sellers, homes are still selling, but buyers are more selective and price-sensitive.”
