The UK housing market saw its first monthly decline of 2026 in May as the conflict in the Middle East reduced consumer confidence and weakened buyer demand.
According to Nationwide’s latest house price index, prices fell by 0.6% during the month, while annual growth slowed to 1.7% from 3.0% in April, with the average UK home now worth £278,024. That is the first monthly decline of the year and suggests the market has lost some momentum following a relatively strong start to 2026.
However, Nationwide believes the latest slowdown is more likely to be a temporary wobble than the start of a broader downturn.
Robert Gardner, the lender’s Chief Economist, says uncertainty caused by developments in the Middle East and the resulting rise in energy prices and market interest rates meant “some loss of momentum was to be expected”.
Confidence takes a hit
He says that since the conflict began, housing market sentiment has weakened, consumer confidence has fallen, and prospective buyers have become increasingly cautious. He cites Royal Institution of Chartered Surveyors data that shows new buyer enquiries fell sharply in March and remained deep in negative territory in April.
Nationwide remains optimistic
Even so, he adds that the housing market entered this latest period of uncertainty from a relatively strong position. The economy was also showing some positive signs – GDP grew by 0.6% in the first quarter of 2026, while inflation softened more than expected in April.
Although Gardner expects economic growth to be weaker and inflation higher than previously forecast this year, he says the ultimate impact will depend on how long current geopolitical tensions persist and how policymakers respond.
Fundamentals remain strong
More importantly, he argues that many of the factors supporting housing demand remain in place. Household debt is at its lowest level relative to income for around two decades, while many households have built up savings buffers in recent years. At the same time, wage growth has continued to outpace house price growth, helping affordability to steadily improve.
And, although borrowing costs may be elevated, they remain well below the peaks seen in 2023 and, according to Nationwide, recent increases in market interest rates have only partially reversed earlier affordability gains.
Gardner also points to the impressive resilience shown by both the economy and housing market in recent years. If the current shock proves relatively short-lived and energy prices stabilise in the months ahead, he believes any near-term softening in house prices is also likely to prove temporary.
What it means for the market
Overall, the figures suggest the housing market is entering a period of slower growth rather than experiencing a significant reversal.
Annual house price growth remains positive, while improving affordability, relatively healthy household finances, and borrowing costs should continue to support demand.
If energy prices stabilise and wider economic conditions improve, Nationwide believes the outlook could quickly improve.
