Property market expert Kate Faulkner explains how the outbreak of the war in Iran could impact the positive start we've had to 2026.
7th Apr 20260 1,592 6 minutes read Kate Faulkner OBE
Just when it felt like 2026 might be a more settled year, global factors have yet again impacted on our economy and potentially on our property market.
For some years now when I’m preparing presentations to present on politics, property and the economy, the one thing I have to ask for is the latest possible deadline as market conditions are changing so quickly that commentary can become outdated within days.
The outbreak of another war, while far more serious and awful for those directly affected, is also expected to influence the housing market.
With this month’s analysis of the indices, though, it’s important to note that most index commentary and statistics are currently based on January and February, and these figures do not yet reflect the impact of the war in Iran.
However, this is not the first time global events have disrupted the market. We have seen similar situations before, which gives us some idea of what may happen next.
A positive startBefore the conflict, the outlook for the year was encouraging, as inflation was falling and was forecast to reach around 2%, and interest rates were expected to fall from 3.75% to potentially as low as 3%.
Despite expectations that transaction volumes would dip year-on-year in Q1 (due to the rush to complete purchases in early 2025 and benefit from the Stamp Duty holiday), the first few months of market activity have been quite buoyant for most markets.
According to Chris Watkin and TwentyEA data:
– Listings to Week 11 of 2026 reached just over 400,000, 12% above the 10-year average – Gross sales were just over 271,000, lower than 287,000 in 2025 but still the 4th highest level in the past decade – Prices continued to rise modestly, around 1–2% year-on-year across the UK
The impact of the Iran warSo the earlier view of “so good, so far” was reasonable at the time. However, the situation has now changed.
There is some cautious reassurance from forecasters, but the key issue is inflation as the conflict has immediately affected oil prices, so we’ve all seen at the pumps prices go up substantially and this will soon feed into the cost of goods and services, and we know it will push inflation higher.
Current forecasts suggest that inflation could rise to around 4%, although if the war stops fairly soon, it should fall later in the year and if this case the overall average for 2026 could be around 3.6%. This would mean inflation would be very similar to 2025. Meanwhile, wage growth is expected to track at a similar level, so people’s incomes will hopefully not be eroded too much.
While this is not as severe as the double digit inflation spikes we saw in 2022 and 2023, it is likely to mean that the Bank of England will want to use interest rates to keep inflation as low as possible under the circumstances.
What this means for interest ratesWith inflation under pressure, forecasts of the impact on interest rates has varied. Some have suggested that speculation that rates could rise up to four times this year, which would be an equivalent increase of around 1% (to 4.75%).
However, the more widely expected scenario is that rates remain at around 3.75% throughout 2026 and therefore meaningful reductions may now be delayed until 2027.
These forecasts will depend heavily on the duration and outcome of the conflict, as well as how quickly we can return to more stable oil production and supply.
Early indications are that the market has held up well despite some pretty hefty shocks and hopefully this will continue.”
For what it’s worth, looking at the market during all the instability over the last 10 years, the property market is likely to continue to function well, at least from a transaction perspective.
Buyers and sellers are still active and transactions are expected to reach around 1.2 million this year. Prices on the other hand are likely to remain broadly stable.
We may see some localised property price falls in London, but the rise in oil prices may help halt the huge declines we’ve seen in Aberdeen since September 2014 where prices have dropped by over 60%!
However, early indications are that the market has held up well despite some pretty hefty shocks and hopefully this will continue, as long as the war is brought to a swift close.
Insights from the property market indices
Rightmove (March release)
Housing market steady so far in March despite global uncertainty
– The March market is steady so far despite the new global uncertainty created by the Iran war, but it’s too early to see the full impact. – Average new seller asking prices rise by 0.8% (+£3,023) in March to £371,042. This is a typical price increase for this time of year. – The number of homes for sale at this time of year remains at its highest level for 11 years. This is limiting price growth and makes it important for sellers to price their properties carefully to compete with other homes on the market
Home (March report)
Spring optimism lifts prices
– Pricing Ticks Up on Seasonal Optimism: The mix-adjusted average home price for England and Wales jumped 0.6% during February. Annualised growth, however, remains poor at a mere 0.6% higher than in March 2025. – Market Picks Up the Pace: Typical Time on Market (TToM) for unsold properties in England and Wales reduced last month but remains six days higher than in March 2025. Marketing times for unsold property are at a 5-year high. The worst increases year-on-year continue to be found in London and the South West. – Unexpected Drop in Stock Levels: An unexpected drop in stock levels occurred during February. Counter to seasonal expectations, the total unsold stock on the market nudged down by 0.3%. The current sum of agents’ portfolios now sits 1.7% lower than in March 2025. This positive development partly justifies some of the upward price action. – Supply Remains in Line with Expectations: The total number of new instructions in February came in at 1% less than in February 2025. The most significant year-on-year reductions of new sales listings were in the North West and Wales (5% and 6% respectively).
Nationwide (February)
House price growth holds steady in February
– Annual house price growth remained steady at 1.0% in February. Prices increased by 0.3% month on month, after taking account of seasonal effects. – This reinforces the view of a modest recovery after a dip at the end of 2025, most likely reflecting uncertainty around potential property tax changes ahead of the Budget. Nevertheless, the number of mortgages approved for house purchase remain close to the levels prevailing before the pandemic. – Looking across 2025 as whole, total housing market transactions were 10% higher than in 2024. As we explored in our Housing Affordability Report, improved affordability and an easing in credit availability has helped to support first-time buyer activity, with mortgage completions up 18% year on year. – There has also been a gradual increase in the number of buy to let purchases involving a mortgage, although activity remains quite subdued compared to historic levels, reflecting the continued headwinds impacting this part of the market. For example, the higher interest rate environment tends to exert more of a drag on landlord demand (rather than owner occupier), while changes to the regulatory environment have also impacted landlord sentiment.
Halifax (February)
House prices rose in February as market maintains early-year momentum
– The housing market built on its steady start to the year in February, with average prices rising by +0.3%, following an increase of +0.8% in January. Annual growth also picked up to +1.3%, its strongest rate for 4 months. Since the start of the year, average prices have increased by around £3,000, with a typical property now costing £301,151. – These latest figures suggest the market has regained some momentum after a softer end to 2025. While industry data for January show a slight easing in new mortgage approvals, overall activity has continued to prove resilient. – There’s no doubt that affordability remains stretched, supply is constrained, and regional disparities persist. For those without family support, the path to home ownership feels particularly challenging. – However, conditions have been gradually improving, with easing interest rates and real wage growth helping to support buyer confidence. As ever, timely and expert advice remains key to helping more people achieve their goal of stepping onto the property ladder. – Looking ahead, geopolitical uncertainties seem set to influence the outlook for inflation and the wider economy. Against that backdrop, markets are now anticipating a more gradual path for interest‑rate reductions. If realised, the speed at which borrowing costs ease may be tempered.
E.surv (March release)
Prices up, but only modestly
– National growth at 1.8% with momentum led by Scotland, Wales and the North. – The capital down 2.5% YoY, dragging national averages. – Strong early-year demand could be tested if geopolitical tensions escalate further, with the Middle East conflict already adding volatility to swap rates and slowing the pace of mortgage rate reductions.
Zoopla (February)
Sales activity is healthy, but house price inflation remains subdued at 1.3%
– Strong sale numbers are supported by average mortgage rates dropping below 4% (although I believe this may rise due to the Iranian war). – 40% of homes for sale are now cheaper to buy with a mortgage than rent. – Sales activity is healthy, but house price inflation remains subdued at 1.3%. – House price rises are higher than last year in northern England and Scotland. – Price falls have moderated in southern England.
Tagshouse prices 7th Apr 20260 1,592 6 minutes read Kate Faulkner OBE Share Facebook X LinkedIn Share via Email