UK Property Market: Navigating Unexpected Volatility

Back at the start of this year, I highlighted how the UK property market appeared set for a period of steadiness, following the ongoing uncertainty of the months before.

Falling interest rates, more realistic house price growth and ongoing investment opportunities all indicated a more stable outlook.

Just a few months later, that outlook has shifted considerably in the face of the escalating tensions in the Middle East – a stark reminder of how quickly the markets can change. Here’s where we currently stand.

Markets on the move – interest rate and inflation concerns

Prior to the conflict in the Middle East, the financial markets were feeling increasingly optimistic about the direction of interest rates.

Inflation was cooling, the labour market was softening slightly, and expectations were rising that the Bank of England could build on its December 2025 rate drop with further cuts throughout 2026.

But that has all changed.

The sharp rise in oil and energy prices resulting from the conflict in the Middle East immediately raised concerns about inflation returning – throwing into doubt the likelihood of interest rate cuts happening soon.

The Bank of England says it is monitoring the situation closely and will do “what is necessary” to make sure inflation stays on track to meet the 2% target in the medium term¹.

In my view, that means the Bank is likely to hold interest rates rather than cut them in the coming months.

 Impact on borrowing

When inflation risks rise, financial markets respond, and those shifts feed directly into swap rates — the key mechanism lenders use to price fixed‑rate mortgages.

That adjustment became apparent over a relatively short period, with swap rates across key fixed‑term maturities moving higher as market expectations evolved. While these changes can appear modest at first glance, they are meaningful within mortgage markets and can quickly feed through to lenders’ funding costs and, ultimately, product pricing.

Property sales/prices in key markets – the UK, Isle of Man, Jersey and UAE

The UK

• Despite the concerns around the conflict in the Middle East, UK property prices have continued to grow in recent months – with Nationwide reporting house prices grew by a higher-than-expected 0.9% month-on-month in March. That’s the biggest rise since December 2024 and up on the 0.4% growth reported in February.^[2]
• In terms of demand and sales, Savills reports recent improvement in activity following the November budget – with agreed sales above the level of a year ago for the first time since September.
• In terms of the premium market, Savills expects the announcement of the High Value Council Tax Surcharge and the reduced likelihood of any further changes to the property tax system to deliver a more stable 2026 – following premium property price falls in 2025 that included prime central London priced declining by 4.8% across the year. However, given the Middle East conflict, we can expect a period of stabilisation rather than strong appreciation.^[3]

Jersey

• In Jersey, Collas Crill expects market activity to continue to grow amid an expectation that local mortgage rates may see a modest reduction in the latter half of the year.
• Latest figures from Statistics Jersey reveal that the average Jersey property price in 2025 decreased by 1% from that of 2024, apart from the price of four-bedroom houses, which saw an average increase of £94,000, to £1,186,000.^[4]

Isle of Man

• Property values in the Isle of Man have shown steady growth in the past year – with average house prices reaching £391,681 by late 2025, around 1% higher year on year.^[5]
• Analysts expect that trend to continue through 2026. Demand for high-quality family homes and coastal properties – particularly around Douglas, Peel and Onchan – should continue as affluent relocators and investors seek stable, lifestyle-driven markets.

UAE

• Somewhat understandably, the conflict in the Middle East has introduced considerable caution into the UAE property market.
• According to Goldman Sachs, overall transaction values in the first half of March were down 31% year on year, and 51% month on month.^[6]
• S&P Global expects Dubai’s property market to slow, with fewer sales and lower residential prices. Even before the conflict, it had anticipated weaker demand and slower price growth, and the current environment has strengthened that view.^[7].

Legislation outlook

This quarter will see the first reforms of the Renters’ Rights Act 2025 coming into force in England on 1 May. The law will abolish Section 21 “no-fault” evictions, replacing fixed-term tenancies with rolling periodic agreements.

It will also limit rent increases to once per year and introduce rules banning rental bidding wars and discrimination against tenants with children or on benefits, giving tenants greater security.

Helping you navigate an evolving landscape

All of these developments point to a period of volatility for key property markets. If you’d like help navigating these changes or planning your next steps, we’re here to guide you.

Using our wealth of expertise and network of trusted advisers, we can support you with bespoke lending solutions, ensuring they are seamlessly aligned with your financial objectives.

For more information, please speak with your private banker or get in touch.

[1] What is happening with interest rates in the UK? Bank of England

[2] UK Housing Market Update – Savills

[3] Prime London house prices – Savills Q4 2025

[4] Jersey House Price Index figures released

[5] Average Isle of Man property – Isle of Man Today

[6] UAE real estate deals fall 51% MoM since conflict started

[7] How Long Can Dubai Residential Real Estate Withstand War-Related Strains?