The Iran war appears to have already hit the housing market during March.
The latest Halifax House Price Index shows average UK prices fell 0.5% between February and March, while annual growth slowed from 1.2% to 0.8%.
This put average UK house prices at £299,677.
Amanda Bryden, head of mortgages, Halifax, said: “The recent slowdown in the housing market reflects the wide uncertainty regarding the conflict in the Middle East.
“Concerns about higher energy prices have pushed up inflation expectations, which in turn led to a rise in mortgage rates, reducing confidence that interest rates will be cut this year and dampening the initial momentum in the market seen at the start of the year.”
Bryden suggested that the effect on house prices will largely depend on how long‑lasting these pressures prove to be and the wider implications for the economy and unemployment.
She added: “Mortgage rates are a key factor for buyers, particularly those getting on the ladder for the first time, who are already balancing the challenge of saving a deposit, with the cost of borrowing.
“As a result, many are likely to watch movements in mortgage rates closely, before making a decision on any home purchase. In this environment, professional advice can play an important role in helping people understand their options and make informed decisions that are right for their individual circumstances.
“However, the recent increase in UK mortgage rates has been more modest than the sharp rises seen during the mini Budget of 2022. Further, many households will already be on fixed deals, protecting them from the latest rate rises. Taking all this into account, house prices may prove resilient, even if uncertainty weighs on market activity in the near term.”
Commenting on the index, Iain McKenzie, chief executive of The Guild of Property Professionals, said : “The marginal decline in house prices reflects the cautious mood that is beginning to take hold among some buyers. With borrowing costs rising and inflation remaining stubbornly above target, many households are reassessing their budgets and delaying decisions.
“At the same time, the supply of homes for sale has reached an 11-year high, intensifying competition among sellers. In this environment, pricing strategy is absolutely critical, as overpricing is far more likely to result in prolonged time on the market or price reductions.
“That said, the picture is far from one of collapse. Sales agreed remain relatively stable and transaction levels had been improving earlier in the year, indicating there is still a core of committed buyers. While forecasts still suggest modest growth over the medium term, the risk of weaker-than-expected performance has increased as economic uncertainty builds.”
Nathan Emerson, chief executive of Propertymark, added: “We are at an important intersection where we must clearly acknowledge future challenges ahead. We started the year with positivity in terms of seeing an uplift in the average number of viewings per available property, coupled with general consumer positivity regarding affordability.
“However, a lot has changed in a short space of time, with numerous sub 4% mortgage deals being withdrawn over the last few weeks as the wider economy adjusts to potential uncertainties.
“Inflation is expected to increase over the coming months and this is likely to have an immediate effect on consumer affordability. The rate of inflation will also play intense influence on the Bank of England regarding base rate decisions over the forthcoming months too. In addition, we are also due to see OFGEM make their next decision regarding energy price caps late next month, which again should be highly considered regarding household affordability as the year plays out.”
