UK House Prices Slip in May — And What It Means for the Housebuilders

Nationwide reported a 0.6% month-on-month fall in May, the first decline of 2026 and larger than the 0.2% consensus. Annual growth slowed to 1.7%. Higher mortgage rates — driven by the Iran conflict — are the immediate cause. Investors in the housebuilders have already taken a view: every name in the sector is down more than 20% over three months.

Nationwide have come out with data for May showing that the average selling price of UK houses fell 0.6% from April, to £278,024. That is the first month-on-month decline in the Nationwide index this year, and a larger fall than the consensus forecast of just 0.2%. Annual house price growth has slowed to 1.7% in May, down from 3.0% in April.

Nationwide indicate that this is a result of higher mortgage rates, which have been driven up by the Iran war. The average two-year fixed-rate mortgage was 5.68% on Monday, up sharply from 4.83% at the start of March. Robert Gardner, Nationwide's chief economist, said the loss of momentum was expected given the uncertainty caused by the Middle East and the subsequent rise in energy prices and interest rates.

In fairness to Gardner, he also made the point that the impact of rising rates on affordability has so far been modest, noting that the swap rates underpinning fixed-rate mortgages remain well below the 2023 highs and broadly in line with 2024 levels. His view is that if the latest shock passes relatively quickly and energy prices normalise, any near-term softening should prove short-lived. I think that is reasonable, but I am not so sure that this shock will be all that quick — the Iranian crisis is continuing for longer than I had previously anticipated.

Something worth addressing here is the unusual pattern we saw around this time last year. In 2025, we had negative figures in March and April, then a reasonably strong positive figure in May, and then a much greater negative figure in June. Why was that? The answer is stamp duty.

The temporary stamp duty thresholds introduced by Liz Truss's government in 2022 expired on 31 March 2025. From 1 April 2025, the nil-rate threshold for first-time buyers dropped from £425,000 back to £300,000, and the standard threshold for home movers fell from £250,000 to £125,000. This meant buyers rushed to complete their purchases before the 31 March deadline to avoid the higher tax.

The result was a distortion: a surge of completions in Q1 2025 pulling demand forward, a dip in April 2025 as that demand had been exhausted, a partial bounce-back in May as the market found a more normal footing, and then renewed weakness into June. That is worth bearing in mind when comparing year-on-year figures right now.

The monthly figures

Nationwide House Price Index — monthly data

There are concerns that house prices are likely to weaken over the coming months. I think they are likely to weaken slightly, but maybe not dramatically.

I don't see that there is very much on the positive side looking to support house prices over the coming months, or really within a twelve-month period. Government regulation does not seem to be particularly positive on house building, on enabling the market to hit better liquidity levels to output houses, or on deposit assistance for new buyers. And it is my expectation that interest rates are going to be rising, not falling, from here.

These May figures in themselves are nothing particularly shocking or big. But I do have concerns about where things are heading.

We can also see this playing through in housebuilder share prices. Over the last three months, some of these names have seen very dramatic drops. Investors have already taken the weakening outlook into account — they are not expecting particularly good figures from the housebuilders, and they are expecting volumes to disappoint in the coming months.

Over the last three months, the best performer has been Berkeley Group, down "only" 21.4%. That is quite dramatic for the strongest name in the sector.

Housebuilder sector snapshot

Vistry has been the worst hit at −60.9% over three months, followed by Crest Nicholson at −55.0% — the latter compounded by its banking covenant troubles. Even the most resilient names, Berkeley and Persimmon, are down more than 20%.

The charts below show each housebuilder's share price performance over the trailing twelve months. The pattern is strikingly consistent: a reasonable run into February 2026, followed by a sharp collapse from late February or early March as the Iran conflict, rising mortgage rates, and weakening sentiment all hit at once.

Barratt Redrow Bellway Berkeley Crest Nicholson Persimmon Taylor Wimpey Vistry

Barratt Redrow (LSE:BTRW) — 12-month share price, −28.9% over three months.

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Charts: ShareScope. Percentage scale on left axis, pence price on right axis, with daily volume below.

As always, it becomes dangerous trying to catch a falling knife. If momentum is on the downward edge for these housebuilders, there is a lot of risk in going in and trying to buy the shares. But I would highlight that these are very dramatic movements — and dramatic movements are exactly where value opportunities can emerge for the patient investor.

While they are not doing great, the housebuilders have not been doing oh so badly. I do not anticipate any of them — even in the case of Crest Nicholson — going under. They are all well capitalised. They have cash. They have been paying dividends. They have valuable land banks that provide genuine asset backing.

So while I am cautious on the near-term direction of house prices and transaction volumes, I am not concerned on the sector's survival. The question, as ever, is one of timing and price — and with some of these names now trading at substantial discounts to net asset value, the long-term opportunity is becoming more interesting even as the short-term news stays gloomy.