Will house prices be affected by the Iran war?

The proportion of real estate sold last weekend fell to its lowest level in 15 months amid fears the Middle East conflict will

UK house prices fall as Iran war uncertainty dampens demand. Average UK house prices fell by 0.5% in March, according to Halifax, as mortgage rates driven higher by the repercussions of the Iran war dampened demand.

The escalating conflict and surging energy prices. Among Iran, the U.S., and Israel in early 2026 has introduced significant volatility and uncertainty into global real estate markets, primarily dampening the spring selling season, cooling buyer sentiment, and driving up construction costs amid Ray White Urban Springs +2

Key impacts reported as of April 2026 include:

1. Global & Regional Market Impacts

• United States: The housing market is experiencing a "freeze," with sales in March dropping to a nine-month low as uncertainty over the conflict and rising mortgage rates, which hit 6.43% for 30-year fixed loans in mid-March, sidelined buyers.
• Australia: Buyer sentiment has weakened, leading to a drop in auction clearance rates to 56.9% in late March, the lowest in over 15 months. While demand is soft, chronic housing shortages in cities like Perth are expected to support prices, even as overall growth moderates.
• United Kingdom: Housing market activity is expected to soften as mortgage rates surge; the average two-year fixed rate increased from 4.83% in early March to 5.84%.
• Middle East: Gulf energy exporters are seeing severe economic impacts, with potential for long-term repairs to infrastructure and reduced investor confidence, particularly in the UAE.
  

2. Primary Economic Transmission Mechanisms

• Higher Interest Rates: The conflict has accelerated inflation, particularly through increased energy prices, pushing central banks (including the RBA) to consider holding interest rates higher for longer to combat rising costs.
• Surging Construction Costs: Rising oil prices have triggered a surge in building materials (plastics, steel, transport), which is inflating construction costs and forcing developers to delay or cancel new projects.
• Reduced Buyer Confidence: Buyer urgency has decreased, and many investors are adopting a "wait-and-see" approach, resulting in longer listing times.
  

3. Investment Trends

• Institutional Shift: Institutional investors are reducing their allocations to the real estate sector for the first time since 2012, reflecting high sensitivity to interest rates and increased risk.
• Safe Haven Divergence: While general sentiment is cautious, some observers suggest that severe global instability could eventually drive capital into "safe" residential markets like London or Sydney.
  

Bottom Line: The conflict is viewed not just as a headline shock, but as a long-term inflationary driver that threatens to stifle the 2026 housing market recovery and shift it toward a period of lower growth or stagnation.

https://www.youtube.com/watch?v=8TiX622CFak

Buyers are steering clear of real estate auctions with the threat of significantly higher interest rates and uncertainty about the end of the war in the Middle East leaving prospective owners worried about bidding.

The auction clearance rate across the country fell to 56.9 per cent at the weekend, its lowest in more than 15 months outside quiet holiday periods, suggesting a long period of sluggish growth in property prices.

Auction sales have dropped to their lowest level in 15 months, outside of normal low-volume holiday periods. Peter Rae

The unseasonably low clearance rates come after the Reserve Bank of Australia raised the cash rate for the second time this year to 4.1 per cent last Tuesday. Economists and traders expect at least two more increases before the end of the year, taking the rate to its highest since 2008.

Dan White, the managing director of real estate giant Ray White, said there had been a noticeable change in sentiment at the top of the market since war broke out between the United States, Israel and Iran in late February, with prospective buyers significantly more cautious.

“The change in sentiment is more driven by images of the war in Iran and the uncertainty from that because I thought the rate rises were considered baked in … but I don’t think anyone had any idea about Iran,” he said, adding that it was likely having an outsize effect on the top end because those buyers were more likely to be tied to volatile stockmarkets.

UK house prices fall as Iran war uncertainty dampens demand - BBC

The ongoing Iran conflict has indirectly affected the Indian real estate market through rising crude oil prices, increased construction costs, and market uncertainty. Housing demand in major Indian cities has seen a slight slowdown as investors adopt a cautious approach amid Sensex volatility. However, India’s long-term real estate fundamentals remain strong due to steady urban demand and infrastructure growth. For long-term investors, this could still be a good opportunity to invest in quality properties, while short-term investors may prefer waiting for market stability.

This is so scary