UK house prices rise as Iran war inflation shock fades
UK property values ticked up in June for the first time since the outbreak of the Iran war, suggesting the initial inflationary shock to the housing market is easing as borrowing costs retreat.
UK house prices rose 0.2% in June to £299,330, marking the first monthly gain since February, according to the Lloyds house price index. The increase snapped a four-month period of stagnation and decline triggered by the outbreak of the Iran war. However, values remain narrowly below where they started the year, having stood at £300,283 in January.
The surprise US-Israeli strikes on Tehran on February 28 sent oil prices soaring and immediately derailed market expectations for Bank of England interest rate cuts. At the height of the conflict, investors priced in rate hikes as inflationary pressures surged. With Brent crude now trading back around $72 a barrel and the Strait of Hormuz reopened to stranded tankers, that inflationary panic has largely subsided, allowing mortgage rates to retreat from their recent peaks.
“Recent price trends continue to reflect wider economic uncertainty, including the impact of global events on inflation and interest rate expectations,” said Amanda Bryden, head of mortgages at Lloyds. She noted that while affordability remains heavily stretched for many buyers, the easing of borrowing costs is starting to offer encouragement to those considering a move.
The annual growth rate ticked up to 0.6% in June from 0.5% the previous month. Demand proved particularly resilient among first-time buyers, with their segment seeing annual price growth jump to 0.8% from 0.3% in May. The average first-time buyer property now costs £240,433, suggesting underlying demand is holding up despite the broader economic headwinds.
Regional divergence deepens
The aggregate national figure masks a sharp geographic split across the UK. Northern Ireland recorded the strongest annual growth at 7.4%, taking average prices to £229,000. Scotland followed with a 3.9% increase to £223,277, while Wales saw growth strengthen to 0.9%, with a typical home costing £231,142.
In England, price growth remained heavily concentrated in northern regions, where property is more affordable. The north-east posted a 2.8% annual gain to £181,133, and the north-west rose 2.4% to £248,218. Conversely, premium southern markets continue to contract. Prices in the south-east fell 2% year-on-year to £381,654, while London values dropped 1.1% to £534,831.
The broader economic outlook remains tied to geopolitical developments in the Middle East. Iran fired at least two missiles at commercial ships transiting the Strait of Hormuz on Monday night, according to US officials, underscoring that the current ceasefire is fragile. Lloyds expects the housing market to continue at a measured pace, contingent on inflation continuing to ease and household confidence gradually improving.
