Full Breakdown
Impact of the Iran Conflict on the UK Housing Market
3/13/2026, 10:57:13 AM
Current State of the Housing Market
The UK housing market is experiencing a significant downturn, primarily influenced by geopolitical tensions, particularly the ongoing conflict in the Middle East. According to the Royal Institution of Chartered Surveyors (RICS), the house price balance fell to -12 in February 2023, indicating that more survey respondents reported falling prices than rising ones. This decline is attributed to a sharp drop in new buyer inquiries, which fell to a net balance of -26, the lowest level since December 2022. Agreed sales also remained subdued, with a net balance of -12, while near-term sales expectations slipped to -2, marking the weakest sentiment since November 2022.
Geopolitical Influences
The escalation of the U.S.–Israel conflict with Iran, which began on February 28, has heightened economic uncertainty and contributed to rising energy prices. This geopolitical backdrop has significantly impacted buyer confidence, leading to a more cautious market sentiment. RICS head of market research and analytics, Tarrant Parsons, noted that the deterioration in the geopolitical landscape has clearly weighed on confidence, with rising oil and energy prices increasing the likelihood that mortgage rates will remain elevated for an extended period.
Regional Variations in Housing Prices
While the national housing market shows signs of cooling, regional variations are pronounced. Areas such as London, the South East, and East Anglia are experiencing significant downward pressure on prices, with net balances of -40%, -24%, and -26%, respectively. In contrast, Northern Ireland, Scotland, and the North West of England are reporting firmer price trends. Despite the current challenges, RICS anticipates a more resilient long-term outlook, with a net balance of +17% of respondents expecting sales activity to rise over the next 12 months.
Rental Market Dynamics
The rental market remains relatively stable, with tenant demand holding steady over the three months leading to February. However, new landlord instructions are deeply negative, indicating a persistent shortage of rental properties. RICS reports that approximately 20% of survey participants expect rents to rise in the coming months, reflecting the ongoing supply constraints.
Official Statements & Responses
RICS has expressed concerns about the volatility in the housing market, stating, “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.” Analysts emphasize that the housing sector could face further challenges if borrowing costs remain high due to inflationary pressures.
Criticism & Opposition
Critics argue that the ongoing geopolitical instability will dampen sentiment during a traditionally busy period for housing transactions. Tom Bill, head of UK residential research at Knight Frank, remarked that while people will still need to move, the mood of hesitation will likely increase due to rising mortgage rates and economic uncertainty.
What's Next
Looking ahead, the trajectory of the housing market will depend on the easing of inflationary pressures and the duration of geopolitical disruptions. The market's recovery hinges on how quickly confidence can be restored among buyers and sellers in the face of ongoing uncertainties.
