UK home buyers have returned to the market en masse over the past two years, fuelling a sustained recovery in housing sales. However, recent speculation over potential tax changes has begun to weigh on activity at the upper end of the market, according to Zoopla’s latest House Price Index.
Buyer demand and the number of new listings for homes priced above £500,000 have fallen by four per cent and seven per cent respectively compared with a year ago, as some buyers start to adopt a ‘wait and see’ approach ahead of the November Budget.
House price growth has continued to slow over the last few months, down from 1.9 per cent in December 2024 to 1.4 per cent in August this year. The average UK home is now worth £271,000, an increase of £4,350 over the last year.
In London, the South East, South West, and Eastern England, higher stamp duty costs and affordability constraints are putting a damper on price growth, with these regions having seen the lowest growth in the country of less than 0.5 per cent. However, these issues are less of a problem for buyers in other parts of the UK, helping to maintain stronger growth. Northern Ireland is leading the way with a significant 7.9 per cent increase, and the North West is seeing a solid rise of 3.1 per cent.
Budget uncertainty impacts home buyers
The average real estate agent now has 36 homes for sale, a 20 per cent increase from 2023 and an eight per cent rise year-on-year. Additionally, the number of sales agreed continues to rise, up three per cent year-on-year, as buyers look to capitalise on the autumn market. However, this recovery is facing headwinds from recent speculation over potential property tax changes.
Table 1: Tax speculation hits demand and new listings for a third of the market
Zoopla analysis reveals that buyer demand and new listings have both declined for homes priced above £500,000. Properties priced over £500,000 have seen a four per cent drop in buyer demand and a seven per cent reduction in new listings over the last five weeks. Similarly, demand for homes over £1 million has fallen by 11 per cent, while new listings are down by nine per cent. This is in sharp contrast to the rest of the market, where demand and supply remain stable.
With one in three homes currently for sale priced above £500,000, and eight per cent over £1 million, the impact of this speculation is most pronounced in high-value markets like London and the South East. While the wider, mainstream market remains resilient, the looming November Budget and the potential for new policies are creating a holding pattern for higher net worth buyers and sellers.
Price growth resilient in areas with more affordable house prices
Average mortgage rates for a new five-year fixed-rate deal are currently between four per cent and five per cent(2), and homebuyers can now afford to borrow 20 per cent more than they could six months ago for the same income. These adjustments have been a key driver of housing demand in recent months, particularly among first-time buyers and those in more affordable regions.
House prices are rising fastest (2.8 per cent) in markets where average prices are below £200,000. In contrast, local markets with average house prices above £500,000 are experiencing static prices.
Table 2: House prices rising faster in lower value markets
Outside of Northern Ireland, house prices are rising by over four per cent in five postal areas including Kirkcaldy (KY) to the north east of Edinburgh, Oldham (OL) in North West England, Tweeddale (TD) covering the eastern side of the Scottish Borders, Motherwell (ML) to the south of Glasgow and Llandrindod Wells (LD)in Wales, north of Cardiff.
Prices continue to register annual falls of one per cent across southern England led by second home hotspots like Bournemouth (BH), Truro (TR), Exeter (EX) and Torquay (TQ) alongside parts of central London (WC and EC). Council tax changes for second homeowners are seeing more homes listed for sale in areas that have a high concentration of second homes which is impacting house price inflation.
Commenting on the report, Richard Donnell, Executive Director at Zoopla, said: “The housing market has experienced a sustained increase in market activity over the last 18 months as mortgage rates have stabilised. The market is on track for the most sales since 2022, but without rapid house price inflation.
“Pre Budget speculation over possible tax change is a regular occurrence but this summer it has been bigger than usual which has led some buyers and sellers to delay home moving decisions for homes priced over £500,000. The wider market remains largely unaffected.
“Serious buyers should think twice before delaying as while the Budget is two months away it takes, on average, six to seven months to find a property and complete a sale”.
Industry experts share their reaction to the data:
Kevin Shaw, National Sales Managing Director at LRG, the UK’s largest estate agency group and property service provider, said: “The housing market has shifted in favour of buyers, with sellers increasingly willing to align with agents’ valuations and to negotiate on price. That balance is welcome for many purchasers, particularly first time buyers who appear undeterred by April’s increase in Stamp Duty and have benefitted from lower interest rates.
At the upper end of the market, speculation over property tax has created hesitation. The prospect of a so-called mansion tax, combined with wider fiscal uncertainty, has dented sentiment and slowed decision-making somewhat.
Other aspects of Zoopla’s research reflect the broader political and economic picture – specifically the reversal of pandemic-driven coastal demand, together with an increase in council tax on second homes in the South West, and a reduction in the number of non-doms impacting demand for second homes in central London.
Yet price growth in more affordable regions – to which we would add the East Midlands and parts of the North West – demonstrates that much of the market remains buoyant. While tax speculation may leave 2025 relatively flat overall, the fundamentals are stable. A stronger spring market should emerge once fiscal policy is clarified and confidence returns.”
Nathan Emerson, CEO of Propertymark, comments:
“A slowing in house price growth will be welcome news for those serious about moving home, especially first-time buyers. However, there are underlying factors affecting affordability and confidence, such as economic uncertainty and inflation, making people cautious about their finances, and stagnating income and wage growth. Recent changes to Stamp Duty across England and Northern Ireland have also reduced buyer affordability, and rumours of further alterations are bound to create some uncertainty.
For some, however, especially current homeowners, a slow tapering in interest rates has allowed lenders to introduce more competitive mortgage products and has decreased the monthly cost for those with variable or tracker mortgages, allowing them to refinance to lower rates. We now look to the Bank of England’s next interest rate announcement in November and hope to see positive introductions through the UK Government’s Budget that will help ease affordability pressures for buyers looking to step onto or move up and down the housing ladder.”
Mark Tosetti, CEO of CAL (part of Movera) comments:
“The housing market is limping on despite ongoing inflationary pressures and a question mark hanging over interest rates. But going forward, with inflation expected to edge up again in October and a base rate cut unlikely, we can expect to see greater hesitancy amongst buyers ahead of the Autumn Budget. Post-budget, if speculation relating to stamp duty or capital gains tax becomes a reality, we could see transactions spike suddenly as buyers and sellers rush to complete before new measures come into play.
The next few months could be a rollercoaster. Brokers will need have their wits about them to stay abreast of the best mortgage rates and take lessons from previous peaks and troughs to keep transactions progressing without bottlenecks.”
