Housing market struggles for momentum as Iran war looms
The UK housing market is struggling for momentum as uncertainty caused by the Iran war prompts banks to hike mortgage rates and pull deals.
New buyer inquiries weakened in February as 26 per cent of property professionals reported a fall in interest, up from 15 per cent in January, according to the Royal Institution of Chartered Surveyors (RICS).
Anxiety around the economic consequences of the Iran war has hit the housing market in recent days, with mortgage lenders pulling deals at the fastest rate since the infamous Liz Truss mini-Budget in 2022.
While the Iran war began at the end of February, the RICS’ findings for that month point to a fragile housing market as confidence continues to recover from speculation around last year’s Autumn Budget.
A net balance of 12 per cent of property professionals reported falls in agreed sales in February.
Housing professionals expect sales to fall further in the immediate future but some (17 per cent) think sales activity will pick up over the next year.
While the North West, Northern Ireland and Scotland are reporting strong price growth, asking prices are falling in London, the South East and East Anglia, RICS said.
Though 33 per cent of industry professionals expect house prices to rise across the UK in the next year, expectations for price growth in the capital have “cooled sharply,” the survey said.
Mortgage rates will stay higher for longer
Tarrant Parsons, head of market research and analytics at RICS, said: “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.
The recent rise in oil and energy prices caused by the conflict in the Middle East means mortgage rates will remain higher for longer, he said.
Tom Bill, head of UK residential research at Knight Frank, said: “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, said: “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.”