UK Housing Market Loses Momentum Amid Iran Conflict Uncertainty
Volatility has returned to the UK housing market as geopolitical tensions surrounding the Iran war prompt financial institutions to increase mortgage rates and withdraw lending deals. According to the latest data from the Royal Institution of Chartered Surveyors (RICS), new buyer inquiries weakened significantly during February, with twenty-six percent of property professionals reporting a decline in interest. This marks a notable increase from the fifteen percent who reported falling interest during January.
Mortgage Market Disruption Mirrors 2022 Mini-Budget Crisis
Anxiety regarding the economic consequences of the Iran conflict has severely impacted the housing sector in recent days. Mortgage lenders are currently pulling deals at the fastest rate observed since the infamous Liz Truss mini-Budget crisis of 2022. Although the Iran war commenced at the end of February, the RICS findings for that month reveal a fragile market where confidence is still recovering from speculation surrounding last year's Autumn Budget.
A net balance of twelve percent of property professionals reported declines in agreed sales during February. Housing experts anticipate sales will decrease further in the immediate future, although a minority of seventeen percent believe sales activity will improve over the coming twelve months.
Regional Price Divergence and Cooling London Expectations
The survey highlights significant regional disparities in price growth. While the North West, Northern Ireland, and Scotland are experiencing strong price increases, asking prices are declining in London, the South East, and East Anglia. Although thirty-three percent of industry professionals expect UK house prices to rise overall in the next year, expectations for price growth in the capital have cooled sharply according to the RICS data.
Experts Warn of Prolonged Higher Mortgage Rates
Tarrant Parsons, head of market research and analytics at RICS, commented: "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."
Parsons further explained that the recent surge in oil and energy prices caused by the Middle East conflict means mortgage rates will remain elevated for an extended period.
Tom Bill, head of UK residential research at Knight Frank, added: "Demand had been recovering after the uncertainty caused by November's Budget, but the Middle East conflict will dampen sentiment during a traditionally busy period for housing transactions. People will still need to move but geopolitical instability will increase the mood of hesitation while rising mortgage rates due to energy price spikes will curb spending power."
Jeremy Leaf, a north London estate agent and former RICS residential chairman, noted: "Even before the Iran war, it is clear the market was in a cautious state. Confidence has definitely improved this year compared with the end of last but remains relatively fragile."
The combination of geopolitical uncertainty and its direct impact on mortgage affordability continues to create challenging conditions for both buyers and sellers across the UK property landscape.
