The UK housing market is doing much worse than expected
Key Points
- The UK housing market is doing much worse than expected, thanks in part to the war in Iran.
- Rightmove has revised its housing forecast for this year from +2.0% to -2.0%, a significant swing in outlook.
- The property platform said this change was driven by geopolitical factors, Budget uncertainty, and Bank Rate volatility.
- Nationwide also noted increased pressure on the UK housing market and said that energy price shocks pose risks to inflation and the housing market.
Online property platform Rightmove has revised its predictions for 2026 house prices, with the UK market now doing much worse than it initially expected.
When the company published its original forecast for the UK housing market in December 2025, it predicted that house prices would rise by 2% over the course of this year.
Now, based on the latest house price data, it has revised its prediction. Rightmove now expects average UK house prices to fall by up to 2% by the end of the year.
The company noted that its latest data shows house prices have already dropped by 1% compared to the same period last year, bucking its initial forecast significantly.
The company noted that this is a national forecast and movements in individual locations will likely vary.
The United Kingdom’s housing market is made of up many smaller regional markets, which differ greatly based on affordability, buyer trends, and regional regulation.
For example, while homes in London are generally plummeting in value, those in more affordable areas in Scotland or the North of England might still see their property price growing year-on-year.
Explaining its revised forecast for the UK housing market, Rightmove said the biggest factors influencing its outlook included changes in mortgage rate expectations as a result of global geopolitical events and the potential impact of the Budget next month.
“The first half of 2026 was more challenging for the housing market than many predicted, with the unexpected war in Iran contributing to higher mortgage rates and greater uncertainty for buyers,” said Rightmove property expert Colleen Babcock.
“Pricing remains critical, and it’s remarkable that nearly three-quarters of homes that have sold so far this year have done so without needing an asking price reduction.”
Bank Rate uncertainty worries housing market
While Nationwide’s House Price Index shows a slightly better forecast for the UK market, with house prices for August up 0.2% month-on-month once adjusted for seasonal factors, it has also noted increasing pressure on house prices caused by wider economic conditions.
“Market activity and house prices have remained subdued in recent months, in part reflecting the uncertain economic backdrop,” said Nationwide Chief Economist Robert Gardner.
“Geopolitical tensions remain high, with the conflict in the Middle East exerting upward pressure on energy prices and market interest rates. Market expectations of the future path of Bank Rate have been volatile.”
However, Gardner said the data suggests activity should regain some momentum provided that confidence returns and interest rates fall back to the levels they were at before the Iran war.
