The start of 2026, while one of the wettest on record, showed promising signs for the UK’s prime property market. With the long-anticipated Budget out of the way, the economy improving and, finally, some sunshine, the fundamentals for a recovery looked set.

Most notably, our late-February buyer and seller survey showed that commitment to move home had significantly improved. But the landscape changed quite quickly following the start of the conflict in the Middle East, meaning the clouds of uncertainty soon reappeared in the prime housing markets.

Buyers have understandably become more cautious as higher energy prices, inflation and mortgage rates point to lower disposable household incomes and weaker GDP growth. This means it looks increasingly likely that the prime markets will remain price sensitive for a while longer.

Market activity in February was above the level of a year ago for the first time since September, though it remained marginally below the same benchmark in the market above £1 million.

In March, net agreed sales remained above the same month last year for both the whole market and the £1 million+ segment.

This tallies with Savills own data, which shows agreed sales remaining resilient throughout March.

In the short term, these numbers have been supported by more motivated buyers, though smaller in number, and those looking to lock into mortgage offers and agree deals in anticipation of further rate rises.

That means the true impact of the recent wave of uncertainty will only become apparent in the coming weeks and months.

A more immediate impact has been felt in the capital, where the tax environment has continued to weigh on international demand and domestic buyers are more exposed to higher debt costs.

UNCERTAINTY FELT BY DISCRETIONARY MARKETS

This heightened uncertainty means prime prices continued to fall during the first three months of the year across the majority of markets. However, in most cases, the rate of price falls has eased compared to late last year when tax uncertainty added to overcast market conditions.

In the more discretionary central London markets, which are typically the most sensitive to periods of uncertainty, prices remain almost -5% below where they were a year ago. In the short term, there is the potential for some safe haven flows of wealth into this market, though the underlying tax environment still remains a barrier to price growth.

There is some evidence of more demand instead being pushed into the super prime rental markets, as people initially look for a base in London without the commitment of buying.

RECENT PERFORMANCE REFLECTIVE OF RELIANCE ON MORTGAGE DEBT

Mortgage markets have been quick to respond to the recent conflict and its expected economic consequences. The members of the Bank of England’s Monetary Policy Committee voted unanimously to hold the base rate at 3.75% at their meeting in mid-March, and there is now the possibility of rate rises, rather than cuts, over the course of 2026. As a consequence, fixed rate mortgage costs have headed north.

Prime markets across the Midlands, North of England and Scotland, continued to see marginal levels of price growth in the first quarter, reflecting the fact they are less reliant on mortgage debt than elsewhere.

Meanwhile, prime properties in outer London and areas closest to the capital have felt the impact more quickly. Here, more than half of buyers use mortgage debt, meaning a more pronounced and more immediate squeeze on buyer budgets.

RECOVERY DELAYED BY RENEWED UNCERTAINTY

What does this mean for the outlook? Mortgage rates, along with other economic impacts that flow from disruption in the oil supply chain, ultimately depend on the length of the conflict, which, on the face of it at least, the US president appears keen to limit.

In the short term, a smaller number of more committed buyers will look to take advantage of less competition in the market. And for those willing and able to take a medium term view, core fundamentals remain strong, particularly as properties at the top end continue to look good value.

Even so, those wanting to sell over the spring and summer will need to be realistic on pricing. Forecasts suggest that the long-anticipated recovery in the prime markets will take a little longer to break through, once the clouds part and sunshine returns.

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