Declining house prices in Britain and economic challenges facing the new Finance Minister

Data issued by Lloyds Bank, on Monday, showed that house prices in Britain recorded their first annual decline in nearly three years, last August, in light of the reluctance of some buyers to enter the market due to high borrowing costs related to recent geopolitical developments and the Iran war.

House price data, affiliated with Lloyd's, which was previously published under the Halifax brand, revealed a decline in prices by 0.4 percent on an annual basis during August, the first decline of its kind since November 2023, compared to the expectations of economists, whose opinions were polled by Reuters, who expected a rise of 0.2 percent.

On a monthly basis, house prices decreased by 0.2 percent during August, contrary to expectations that indicated an increase of 0.1 percent. The previous July reading was also revised from a growth of 0.1 percent to a decline of 0.1 percent.

Andrew Assam, director of mortgages at Lloyds Bank, said that the housing market has faced a more difficult environment in recent months, noting that the impact of global events on inflation rates and borrowing costs has led to an increase in economic uncertainty.

He added that the market is not witnessing a widespread wave of price reductions by homeowners, but an increasing number of sellers prefer to wait, rather than accept offers that they consider low, while some buyers are awaiting clarity on the economic conditions before making purchasing decisions.

On the other hand, data issued last week by the competing Nationwide Building Society showed that house prices rose by 1.6 percent on an annual basis during August, with a monthly increase of 0.2 percent.

For her part, Ruth Gregory, deputy chief economist at Capital Economics, expected continued pressure on the housing market during the coming period, noting that the recent rise in market interest rates may push the average interest on two-year fixed mortgages to about 5 percent this September, compared to 4.8 percent during July.

She added that the organization's expectations indicate that house prices will remain almost stable during the remaining four months of the year, which means that prices in the last quarter of 2026 will be only about 1.5 percent higher, compared to the same period of the previous year.

In the latest official data issued by the British Office of National Statistics, house prices rose by 2 percent during the twelve months ending in June, compared to a growth of 3 percent during the period ending in May, which reflects a clear slowdown in the pace of growth of the British real estate market.

Britain's new finance minister, John Healey, a former unionist who supported flexible bank regulation, will soon have to decide the appropriate balance for what could be the defining moment of Andy Burnham's premiership.

Bond investors want to know how Burnham will advance his ambitions, from housing and welfare to defence, while maintaining fiscal discipline.

Ahead of his first budget on October 28, Haley will deliver his first major speech on Monday on how to accelerate the growth of the world's fifth-largest economy, a challenge that his predecessors failed to achieve for 20 years, according to Reuters.

In light of the rise in global borrowing costs, the budget is also likely to include tax increases.

John Monks, former president of the Trades Union Congress, who put Healey in charge of communications in the 1990s, said: “There will be intense events around him, but he will remain calm and composed. "It's a talent he has."

Monks added: “I wanted someone who could formulate the economic case, and someone who could not only sell a narrative, but also hold discussions with the Bank of England and the Treasury. “And he was able to do it all.”

Healy risked his dream of becoming a Labor MP when he entered into a dispute with Monks on the one hand, and party leader Tony Blair and his communications director Alistair Campbell on the other, over trade union reforms.

“He confronted Blair and Campbell directly, as I did, and they did not go ahead with the proposal,” Monks said.

As a junior finance minister in the 2000s, Healey demonstrated that he was not a follower of Labour's tradition, telling MPs about the "importance of a flexible, principles-based regulatory approach" to the City's City rules.

More recently, as Defense Secretary in Keir Starmer's government, Healey retired two warships and retired a drone system to spend money on other areas.

“There is no doubt that he knew what the right things were to do,” said Kevin Craven, chief executive of aerospace and defense trade body ADS.

But Healey resigned as Defense Secretary in June, in a blow to Starmer, who resigned as Prime Minister 11 days later.

“You have been unable, and the Treasury has been unwilling, to commit the resources the country needs to defend it at this time of increasing threats,” Healey told Starmer.

But when media reported last month that he would not immediately raise defense spending to the levels he had previously sought, opposition MPs accused Haley of hypocrisy, prompting Burnham to say a timetable would be set in 2027.

It remains unclear how far Healey will push for additional money to raise defense spending to 3 percent of economic output by 2030, a level he said was necessary when he resigned.

Richard Dannatt, the former commander of the British army, said Healey was unlikely to build his own power base at the Treasury, describing him as “a professional, relatively old-fashioned Labor politician who understands hierarchy.”

Dannatt added that while he was unlikely to be a "revolutionary" at the Treasury, he would likely be able to overcome internal opposition and find the money he wanted for defense.

The first test for Haley will be to prepare a budget that does not spark bond market turmoil - an experiment that toppled the short-lived Liz Terrace government in 2022 - but delivers support to voters with less than three years until the election.

In her first Budget two years ago, then Finance Minister Rachel Reeves raised taxes on employers, which strained relations with business and contributed to a hiring slowdown.

Healey will need to show progress on Burnham's priorities, including giving more powers to local areas, while finding money to plug an immediate £5bn shortfall in defense spending.

This task is made more difficult by Burnham's commitment to increasing state pensions and rising social welfare spending.

But, in contrast to Reeves' warnings of difficult times ahead, Healey sought to strike an optimistic tone about the British economy.

After taking office, Burnham's government moved to reduce household energy bills to a limited extent, cap bus ticket prices, and reduce taxes for some hospitality sector companies.

The head of one of Britain's largest direct-to-consumer companies praised Healey for saying he was as concerned about the cost of doing business as he was about the cost of living.

But two decades after his last stint at Treasury, Healey acknowledges how difficult the situation is now, with the debt burden three times what it was. “The conditions then were very favorable compared to what this country, government, people and businesses are facing now,” he wrote on social media.

Saudi-Serbian relations are heading towards a new phase of economic and diplomatic cooperation, with Riyadh and Belgrade moving to expand the partnership in the sectors of energy, technology, agriculture and food industries, in parallel with rapid growth in the volume of trade exchange between the two countries. This comes at a time when the two countries' hosting of Expo 2027 in Belgrade and Expo 2030 in Riyadh opens additional horizons for exchanging experiences and building new partnerships and projects.

A meeting held last week in Belgrade between Saudi Deputy Foreign Minister Walid Al-Khuraiji and Serbian Foreign Minister Marko Duric witnessed the signing of an agreement to cancel visas for holders of diplomatic and official passports, in a step that would support official communication and enhance cooperation between the two countries.

The two sides discussed ways to develop cooperation in the fields of energy, through joint projects, information and communications technology, advanced technologies, agriculture and food industries, in addition to enhancing the presence of Serbian companies in the Saudi market and increasing the investments of Saudi partners in Serbia. Serbia is scheduled to participate in the Saudi Food Exhibition in Jeddah later this month with more than 50 companies.

Three new initiatives for cooperation between the two countries were also launched during the meeting: “Non-Aligned Digital,” the Non-Aligned Movement Film Festival, and an international symposium for young diplomats from the Movement’s countries, in the context of commemorating the 65th anniversary of the First Conference of the Non-Aligned Movement, which Belgrade hosted in 1961.

The meeting came on the sidelines of a celebration marking the anniversary, as Saudi Arabia was among the countries that participated in this founding conference, and was represented at the time by the Minister of Foreign Affairs, Ibrahim bin Abdullah Al-Suwaiyel, who planted the first “tree of peace.”

The Serbian ambassador to Saudi Arabia, Dr. Dragan Bezinic, told Asharq Al-Awsat that last Wednesday’s meeting allowed the Serbian Foreign Minister to renew his thanks to the relevant Saudi institutions for their “exceptional cooperation and support” during the process of evacuating Serbian citizens from Riyadh in the wake of recent events in the Middle East.

Bizenic stressed his country's commitment to deepening comprehensive cooperation with Saudi Arabia, with a special focus on the economic aspect, noting his admiration for the results achieved by the Kingdom within the framework of “Vision 2030,” which he learned about during his visit to Riyadh to participate in the Future Investment Initiative conference last year.

According to the Serbian Foreign Minister, Belgrade is interested in strengthening trade cooperation with Saudi Arabia, increasing exports of Serbian products, and benefiting from the experience and knowledge of Saudi experts in the fields of science and technology. The two sides also discussed expanding partnership and cooperation in Expo, in addition to increasing the volume of mutual trade and investments.

Bizenic believes that Saudi-Serbian cooperation in Expo 2027 and Expo 2030 represents a very important area for deepening relations between the two countries, pointing to the meeting between the Saudi Deputy Minister of Foreign Trade, Jagudom Lazarevic, and the Commissioner of Expo 2027 in Belgrade.

He explained that Belgrade and Riyadh's hosting of two global exhibitions in the coming years, “Expo 2027 Belgrade” and “Expo 2030 Riyadh,” represents a unique opportunity to transform the experiences, knowledge and networks that the two countries will gain through these two events into new forms of cooperation and tangible projects.

He revealed that Saudi Arabia has already signed a contract to participate in Expo 2027 Belgrade, and will have one of the largest national pavilions at the exhibition, in a distinguished location at the entrance to the Expo area. He said that the pavilion will be an opportunity for the Kingdom to showcase its development potential, innovations, culture and commercial opportunities, as well as to promote the Expo 2030 Riyadh exhibition.

Bizenic pointed out that the Serbian Foreign Minister confirmed, during his meeting on Wednesday in Belgrade with Al-Khereiji, that Saudi Arabia could be “one of Serbia’s most important economic and political partners in the Arab world,” given its position in the G20 and OPEC+, and its weight in global energy markets, as it possesses about 16 percent of global oil reserves.

The ambassador believes that strengthening Saudi-Serbian relations, opening the way for more investments and commercial projects, in addition to expanding communication between the business communities in the two countries, would bring great benefits to Serbia and support its economic presence in the region.

In an indication of growing economic relations, Bizenic explained that trade exchange between Serbia and Saudi Arabia has witnessed remarkable growth in recent years, reaching $121 million by the end of 2025, an increase equivalent to nine times its level in 2012. The exchange continued to grow during the current year, reaching $130.4 million in the first half of 2026, recording a 152 percent increase compared to the same period of the previous year.