Six months into the US-Iran conflict, the UK property market has demonstrated greater resilience than initially forecast, according to recent market data and economic indicators.
At the outset of the conflict, the Resolution Foundation warned that sustained hostilities in the Middle East could deliver an £11 billion hit to UK family finances through higher mortgage rates, utility bills and fuel costs, potentially reducing output and employment.
Economic performance exceeds expectations
However, GDP figures for the quarter ending June 2026 showed continued growth of 0.4%, down from 0.6% in the first quarter but indicating the economy has weathered the initial shock. Interest rates have remained unchanged, though mortgage costs have increased for other reasons.
Inflation has risen recently, driven primarily by a 13% increase in utility bills in July, with the full impact expected to be felt during the winter months.
Regional price variations persist
National price indices reveal subdued rather than declining conditions. Nationwide reports annual growth of 1.8%, Lloyds 0.1%, and Zoopla 0.9%. Rightmove recorded a 2% fall in asking prices in August, larger than typical seasonal adjustments.
Regional disparities remain pronounced, with the Midlands and North experiencing continued price growth, particularly for houses. Southern England and the prime market, especially for flats, face more challenging conditions. Aberdeen has been notably affected.
Market activity and buyer demand
Stock levels have increased significantly, with Rightmove reporting the highest inventory in 12 years and Zoopla noting 5% more properties available compared to the previous year.
Despite increased supply, buyer interest has not declined. Zoopla data shows searches up 7% year-on-year, though sales agreed remain 6% lower. Rightmove reports buyer demand has increased 5% since Andy Burnham became Prime Minister.
Affordability pressures mount
Mortgage affordability has deteriorated, with Zoopla reporting a 9% reduction in buying power since January 2026. Average five-year fixed mortgage rates have risen from below 4% in January to approximately 4.8%. A buyer who could afford a £200,000 mortgage at the start of the year can now borrow around £182,000 for the same monthly repayment.
The property market’s performance contrasts with earlier predictions of significant downturns, though challenges remain as economic pressures continue to build heading into winter.
