UK House Prices See First Rise Since Iran War Onset

The UK housing market experienced its first monthly rise since the onset of the Iran War, with house prices increasing by 0.2% in June. The latest data from the Lloyds House Price Index, formerly known as the Halifax House Price Index, revealed that the typical property cost £299,330. This uptick follows a 0.2% monthly drop in May, and the annual growth rate edged higher to 0.6% from 0.5%.

This June increase marks the first monthly gain since February, ending a four-month period of stagnation or decline in the market. Amanda Bryden, Head of Mortgages at Lloyds, noted that recent price trends continue to reflect broader economic uncertainty, including the impact of global events on inflation and interest rate expectations. However, the easing of mortgage rates from their recent highs has provided some encouragement to buyers, thereby supporting demand.

The initial outbreak of the Iran War and the ensuing geopolitical tensions had fueled inflationary fears and led to a sharp spike in mortgage rates, dampening property market confidence. Nevertheless, ongoing peace talks between the US and Iran have helped cool inflation concerns, contributing to a reduction in borrowing costs, which in turn has supported the rebound in house prices. For first-time buyers, annual price growth accelerated to 0.8% in June from 0.3% in May, with the average first-time buyer property now costing £240,433, indicating resilient demand in this segment.

Regionally, the UK exhibited varied performance. Northern Ireland recorded the strongest annual house price growth at 7.4%, followed by Scotland at 3.9%. In Wales, property price growth strengthened to an annual rate of 0.9%. Within England, stronger price growth remained concentrated in the northern regions, with the North East seeing a 2.8% annual rise and the North West recording 2.4% growth. Conversely, prices continued to fall in the south, with the South East experiencing a 2.0% year-on-year decline and London seeing a 1.1% fall in average values.

Analysts and market experts anticipate the housing market to continue moving at a measured pace in the coming period. While lower borrowing costs are expected to provide some support for demand, affordability constraints remain a significant factor. The outlook for house prices will largely depend on inflation continuing to ease and household confidence gradually improving. However, persistent global uncertainties suggest that the market recovery could remain fragile.