House prices fall again as property market ‘deteriorates’

House prices fell again in May as the mortgage rate hikes and surging energy bills caused by the Iran war continued to take their toll on the UK’s fragile property market.

The UK’s average house price fell by 0.6 per cent to £278,024 in May, compared to 0.4 per cent growth in April, according to Nationwide’s house price index.

Weakening house prices are paired with declining consumer sentiment in the property market, with the Royal Institution of Chartered Surveyors recording a sharp fall in new buyer enquiries in March. 

Annual house price growth slowed from three per cent in April to 1.7 per cent in May, as last month’s average house price failed to surpass April’s record.

While mortgage rates jumped sharply at the beginning of the Iran war in February, experts at Nationwide say the housing market’s recent downturn comes as consumer confidence “deteriorates”.

Falling consumer confidence

Brits’ confidence in their own spending power fell to its lowest level in two years in April. 

“Given the uncertainty caused by developments in the Middle East and the subsequent rise in energy prices and market interest rates, some loss of momentum was to be expected,” Nationwide chief economist Robert Gardner said.

This comes despite a surprise improvement in the state of the economy at the start of this year, as GDP grew by 0.6 per cent across the first quarter.

“Nevertheless, economic growth is likely to be somewhat weaker and inflation higher than previously expected this year as a result of developments in the Middle East, although the impact will ultimately depend on the duration of the shock and the policy response,” Gardner said.

Iran war ‘fundamentally changed outlook’

Jason Tebb, president of property selling platform On The Market, said: “The fallout from the war in the Middle East is making itself felt, with uncertainty and the challenging economic backdrop resulting in a softening in the market and some loss of momentum. 

“That said, the housing market continues to demonstrate resilience. Average prices dipped on a monthly basis as focused, price-sensitive buyers negotiate hard, while sellers realise that they will struggle to sell over-ambitiously priced homes.”

Property giant Savills last week downgraded its property price forecast for 2026, saying the Iran war had “fundamentally changed the outlook for the housing market”. 

The property experts said that much of the downgrade was due to the surge in mortgage rates which followed the outbreak of the Middle East conflict.