UK house prices are expected to face renewed downward pressure in the coming months as rising geopolitical tensions in the Middle East weigh on mortgage rates, affordability and buyer confidence.
This is the view of tom billHead of UK residential research at Knight Frank, who warned that higher borrowing costs were likely to further reduce market activity and put additional pressure on pricing in some parts of the UK housing market.
The bill said weakening consumer confidence and increasing economic uncertainty linked to the conflict could weigh on buyer sentiment, especially if volatility persists or energy prices rise further.
While short-term pressure on house prices is expected, knight frank believes modest growth could return towards the end of the year, depending on the duration of geopolitical disruption and how the government responds to the macroeconomic impact in future fiscal decisions.
He said: “The recent rise in mortgage rates will put gradual downward pressure on house prices as it will take several months for the more favorable offers from before the Middle East conflict to expire. This means some buyers are keen to complete while others have seen their spending power reduced.
“We expect house prices to begin to fall in the coming months but to return to modest growth by the end of the year. However, this will depend on how long the conflict lasts, to what extent it escalates and how the government responds to the economic shock, no matter who is Chancellor at the time of the next Budget.”
Bill’s comments come after the latest UK House Price Index released by Halifax on Friday showed that UK property prices fell for the second consecutive month in April.
Halifax, which is part of Lloyds – Britain’s largest mortgage lender – said the cost of a typical UK home fell 0.1% to £299,313 in April. This was followed by a decline of 0.5% in March.
Halifax said the annual rate of house price growth slowed from 0.8% to 0.4%.
Amanda Bryden, head of mortgages at Halifax, said: “After a strong start to the year, recent global developments have added more uncertainty to the outlook.
“In particular, higher energy prices have impacted inflation expectations, leading the market to reassess the path of interest rates – a shift that has already raised borrowing costs for many buyers.
“This has clearly led to greater caution in some households, with cost of living once again coming to mind and extra consideration being given to planned property moves.”
While underlying demand remains, buyer activity has been relatively subdued in recent weeks as buyers have become increasingly price sensitive in the current market.
James Nightingall of HomeFinder AI said: “In April, some home hunters took time off to enjoy the Easter holidays, while others put off the opportunity to arrange a viewing or make an offer. Although buyer interest has remained steady overall, the property market has not seen the surge in activity typically associated with spring as interest rates and geopolitical developments continue to fuel uncertainty.”
Chris Hodgkinson, managing director of House Buyer Bureau, said: “The problem facing the market at the moment is that many sellers are still pricing based on expectation rather than the reality of the current market and this is creating a growing gap between buyers and sellers.”