The UK housing market is showing signs of slowing down because of the Iran War, now entering its fifth week. 

Property portal Zoopla says activity in the market is increasingly being driven by a smaller group of committed buyers as some households start to delay moving decisions. 

Zoopla’s data shows that buyer demand has been running below last year’s levels across the first three months of the year. 

Demand has weakened further over March, reflecting the impact of events in the Middle East with buyer enquiries 13% lower than a year ago as potential buyers adopt a more cautious, ‘wait and see’ approach. 

Average mortgage rates have increased by 0.4 percentage points in the last month, with many sub-4% deals being withdrawn as financial markets, and buyers, adjust to uncertainty over the inflation outlook.

However, sales agreed are proving more resilient than demand, registering a decrease of just 2% year-on-year. 

The portal says this reflects the continued presence of “committed movers” – buyers with mortgage offers agreed and/or a clear need to move – who are continuing to support the number of sales agreed.

Fewer buyers, but  more motivated movers supporting sales

This gap between buyer demand and more stable sales agreed is reflected across the country. 

Buyer enquiries have decreased by between 7% and 19% year-on-year, with the largest decline in active buyers recorded in the North East and West Midlands, albeit with enquiries falling off a high base compared to last year. 

Meanwhile, sales agreed are holding up more consistently, with more modest declines in northern regions of England, again off a high base. 

Unlike buyer demand, sales agreed are flat or slightly higher in some regions such as Wales, Yorkshire and the Humber and London compared to last year.

At the same time, the overall number of homes for sale has increased by 6% year on year, reflecting a continued desire among homeowners to move despite the more uncertain backdrop. 

A significant proportion of transactions are also less sensitive to rising mortgage rates. 

Around a quarter of sales are cash purchases, while many existing homeowners have built up equity and secured borrowing in advance, reducing the impact of higher mortgage rates. 

This is helping to support sales in the short term, but also highlights growing reliance on less mortgage-rate sensitive buyers.

House price growth remains stable

Overall, UK house price inflation is holding steady at +1.3% year on year, with little immediate impact from the recent weakening in buyer demand. 

Price trends remain uneven across the country. Growth is strongest in more affordable areas, with the North West recording annual growth of 3.5%, though price falls across southern England have moderated in recent months despite a softening in demand.

Zoopla does not expect house price growth to slow in the near term, although this depends on demand remaining stable in the coming months. 

A pricing impact would require a more sustained decline in buyer activity and sales volumes meaning current growth rates are set to continue.