Budget speculation around property taxes has contributed to a drop in home buyer demand and sales agreed across the country according to Zoopla’s latest House Price Index1.
The uncertainty has led to house prices falling year on year across London and southern regions of England – for the first time in 18 months. House prices in lower value, more affordable areas continue to increase.
Tax fears split UK house prices
Rumours of more taxes on homes over £500,000 in the run up to the Budget, has created uncertainty across the housing market, leading to a 12 per cent decline in buyer demand and fewer sales agreed in the four weeks up to 23rd November, compared with last year.
The Budget’s impact on house prices has been felt across southern England where, for the first time in 18 months, there has been a year on year fall in house prices across London (-0.1%), the South East (-0.1%) and the South West of England (-0.2%).
In contrast, the broader UK housing market continues to show resilience despite Budget-related speculation. Average UK house prices have increased by 1.3 per cent year on year with the average price of £270,200. Most regions and counties outside the south of England are registering above average price inflation with home values in the North West of England 2.9 per cent higher than a year ago.
Table 1: Year on year house price inflation by English region and country
Post-Budget relief for owners of homes over £500,000
The market uncertainty that plagued the past few months has been largely dissolved following the Autumn Budget, with the measures directly impacting the housing market proving less significant than many home owners had feared from the speculation.
Crucially, the shelving of any proposals for a new annual property tax on homes over £500,000 will be welcome relief for the owners of the 210,0002 homes for sale above this level across the UK. The removal of the threat of extra taxes is set to deliver a much needed boost to buyer demand and overall market activity at the start of 2026. Sellers in southern England will see the greatest boost as more homes for sale are above £500,000 – this is important at a time when house prices are under pressure from a greater supply of homes for sale.
Table 2 – Proportion of homes currently for sale over £500,000 by region & country
Stamp duty ‘fiscal drag’ for housing
While the threat of wider tax changes impacting the mainstream housing market has been removed, stamp duty remains a significant hurdle for home buyers, especially in southern England. The stamp duty price thresholds for existing home owners were set in 2014, while house prices are 47% higher over this time. This is creating ‘fiscal drag’ for home buyers in the housing market with buyers of average priced homes paying more
Since 2019, the number of homes bought by existing homeowners where the cost of stamp duty is more than 2.5% of the purchase price has jumped from 21 per cent to 33 per cent. The cost of buying is growing for average home buyers in towns across the south of England and the case for the abolition of stamp duty as part of wider property reforms remains a strong one.
