Middle East Tensions Weigh on UK Housing Market

UK house prices recorded their first monthly decline of the year in May, reflecting growing economic uncertainty and weaker market momentum, according to Nationwide Building Society.

Average property prices fell by 0.6% compared with April, marking the first monthly decrease since December 2025. Annual house price growth also slowed, dropping to 1.7% from 3.0% the previous month. The average home price across the UK stood at £278,024 in May.

Robert Gardner, Nationwide’s chief economist, said the decline was partly driven by uncertainty linked to developments in the Middle East, which have contributed to higher energy prices and increased market interest rates.

While acknowledging some encouraging economic indicators, Gardner warned that geopolitical tensions could weigh on growth and push inflation higher than previously forecast. He noted, however, that the long-term impact will depend on how long the disruption lasts and how policymakers respond.

Despite current pressures, Gardner stressed that both the UK economy and housing market have shown resilience in recent years. Household debt remains low relative to income, and many households have built up savings, providing a degree of financial stability.

Housing affordability has also improved over time as wage growth has outpaced house price increases and borrowing costs eased from earlier peaks. Although market rates have edged higher in recent months, Gardner said mortgage pricing remains below the highs seen in 2023 and close to 2024 levels.

He added that if geopolitical tensions ease and energy prices stabilise, the recent slowdown in the housing market could prove temporary.

Jason Tebb, president of OnTheMarket, said the effects of conflict in the Middle East are beginning to influence buyer sentiment and market activity. However, he said the housing sector continues to demonstrate strength, with buyers remaining cautious and negotiating firmly while sellers adjust expectations on pricing.

The latest figures suggest the housing market is cooling modestly but remains supported by relatively healthy household finances and sustained buyer demand for competitively priced homes.