House price growth picked up in March, but conflicts in the Middle East have clouded the economic outlook and could lead to a slowdown in the housing market, according to the report.
Annual growth in UK house prices rose to 2.2% in March, up from 1.0% in March, the National Institute for Construction reported.
Property prices rose by 0.9% month-on-month, taking the average house price in March to £277,186.
Robert Gardner, Countrywide’s chief economist, said: “The increase in home prices suggests that the market has recovered after the decline recorded at the beginning of the year.
“However, the sharp rise in global energy prices due to developments in the Middle East indicates a major shock to the global economy, clouding the outlook.
“In the near term, UK economic growth is likely to be slower and inflation higher than previously expected, although ultimately the impact will depend on the timing of the shock as well as the policy response.
“The level of interest rates is particularly uncertain and depends on whether the economic side of demand or supply is badly affected.
However, financial market expectations for the (Bank of England’s) future path have changed significantly.
“By the end of March, three interest rates were cut over the next 12 months, compared to the two cuts expected before the attack on Iran.
“This change has resulted in a significant rise in long-term interest rates (exchange rates) that support stable house prices.
“If it holds, this could reverse some of the house price improvements that have occurred in recent years.
“With consumer sentiment likely to be dampened by the uncertain outlook and the prospect of rising electricity costs, housing market activity may slow.”
Mortgage rates have soared in recent weeks, with financial news website Moneyfacts reporting that hundreds of deals have been withdrawn, with products returning to the market but at higher prices.
Mr Gardner said that, with a large proportion of households with fixed rate mortgages, many are protected from the immediate impact of higher interest rates.
Tom Bill, head of UK housing research at Knight Frank, said: “The impact of the Middle East conflict on the housing market is still in the works.
“The fact that the loan is offered for a period of six months means that the effects of higher borrowing costs will permeate the market this spring and summer, putting downward pressure on prices and sales prices.”
Amy Reynolds, head of sales at London-based brokerage Antony Roberts, said: “The conflict in the Middle East has contributed to increased caution across financial markets.
“We’re seeing a slight decrease in viewing numbers as some buyers stop checking in; however, the market is still there.”
Alice Haine, a private financial analyst at Bestinvest by Evelyn Partners, said that the price growth seen in March could be “the calm before the storm, if the cost of borrowing continues to rise due to the recent political shock”.
He added: “The escalating conflict in the Middle East has raised inflation and interest rate expectations, which could dampen demand if consumers find it difficult to get the credit they need.”
A nationwide report released by HM Revenue and Customs (HMRC) said that an estimated 102,410 house sales took place in February, which was 6% lower than in February 2025, but 6% higher than in January 2026.
It was the highest monthly figure for UK house sales since March 2025.
The HMRC report said that the data “does not necessarily reflect the current strength of the housing market, as it represents completion of approximately two to four months after the first offer is made on the property.”
Ian Futcher, financial planner at wealth manager Quilter said: “As this was the highest number recorded since March last year, there were signs that the housing market was starting to wake up from its slumber.
But rising political tensions, expectations of higher long-term interest rates, and the recent rise in mortgage deals may cause it to return to its slumber.
“While some of that stimulus remains to be felt, the fall compared to last year suggests there is enough to show that consumers are taking longer to commit, with some choosing to wait for clear signs of rates.
“It is likely that, going forward, the uncertainty around mortgage rates and the political climate will weigh on transactions as people sit tight and wait for things to calm down before buying or selling.
“From a policy perspective, this highlights how prudential action remains in the lending environment.
“Prices are relatively stable, but sales figures tell us that confidence is still weak and closely linked to the cost and availability of mortgage deals.
“Those rates also remain unchanged, with uncertainty surrounding the Bank of England’s next interest rate moves and whether or not it may have to raise rates this year.”
Here are the average house prices for the first quarter of 2026, followed by the year-on-year change, according to Nationwide Building Society:
Northern Ireland, £225,269, 9.5%
North West, £229,173, 3.3%
Scotland, £191,747, 3.0%
Wales, £215,411, 2.7%
North East, £170,378, 2.6%
London, £538,181, 1.7%
Yorkshire and the Humber, £214,866, 1.6%
Outer Metropolitan (includes St Albans, Stevenage, Watford, Luton, Maidstone, Reading, Rochford, Rushmoor, Sevenoaks, Slough, Southend-on-Sea, Elmbridge, Epsom and Ewell, Guildford, Mole Valley, Reigate & Banstead, Runnymede, Spelthorneking, Wellssorneking, Wallthorneking, Wellsthorneking, Wellsthorneking, Wellsford, Wellsford, Wellsington, Wellsington, Wellsington, Wellsington and Wellsington Maidenhead, Wokingham), £430,260, 1.0%
East Midlands, £236,016, 0.3%
South West, £305,701, 0.1%
West Midlands, £249,722, 0.0%
East Anglia, £273,237, minus 0.4%
Outer South East (includes Ashford, Basingstoke and Deane, Bedford, Braintree, Brighton and Hove, Canterbury, Colchester, Dover, Hastings, Lewes, Fareham, Isle of Wight, Maldon, Milton Keynes, New Forest, Oxford, Portsmouth, Southampton, Swale, Tendring, Thanetrford, Winche, £336,036, minus 0.7%
