Zoopla: Property tax speculation creates uncertainty for a third of home buyers

Speculation about an annual property tax on homes worth more than £500,000 could cause some home buyers to adopt a “wait and see” strategy, potentially impacting market activity, according to Zoopla.

The property website reports that house price growth has slowed over recent months, although this slowdown looks to have stabilised with average house prices 1.3% higher than a year ago. This gives an average UK house price of £270,600.

It says that while sales agreed are up 5% compared to last year, rumours about a new property tax may impact homes valued at over £500,000 – currently a third of homes for sale.

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Chancellor Rachel Reeves is reportedly considering replacing stamp duty with a new national property tax on the sale of homes worth more than £500,000.

Zoopla says the speculation has attracted a lot of interest and “the risk is that this creates uncertainty for home buyers in the coming weeks ahead of the Autumn Budget. History shows that tax changes can impact market activity and buyer expectations”.

Richard Donnell, executive director at Zoopla, comments: “Speculation over the removal of stamp duty replaced by a new annual property tax for homes over £500,000 may make some buyers consider a ‘wait and see’ strategy. This covers those who may possibly save money on purchases under £500,000 and concern those buying over this level as well.

“A third of homes for sale are over £500,000, with the impact felt more keenly in London and the South East where home values are higher.”

We reveal the UK regions where a new property tax would hit homeowners hardest, if it came into force, in a separate piece.

Autumn Budget tax rumours aside, those looking to sell a house must focus on getting the price right in order to sell quickly, according to the property website. Homes that require a cut to their asking price take 2.4 times longer to sell than those that don’t, says Zoopla.

Stuart Bailey, head of London super-prime sales at Knight Frank, comments: “The autumn market is about to begin and this year will be shrouded by speculation of how to decipher the government’s messaging on property tax.

“Either way, sentiment impacts decision making and the longer a property takes to sell (if mispriced for example), the bigger the risk of something going wrong, as buyers become ever more hesitant, and the risk of market slowdown increases.”

Jeremy Leaf, north London estate agent and a former Royal Institution of Chartered Surveyors chairman, tells MoneyWeek that the housing market inevitably lost a little steam over the summer period with so many decision makers away and listings continuing to pile up.

He warns that rumours of a new property tax can have a detrimental impact on housing market confidence and activity “which we certainly witnessed ‘on the ground’ since the story broke last week”.

Reeves is also said to be considering a form of a mansion tax by introducing a capital gains tax charge on properties that sell for more than £1.5 million.

Homeowners selling their main residence would lose private residence relief and instead pay capital gains tax on any increase in the property's value, set at 24% for higher-rate taxpayers and 18% for basic-rate taxpayers.

Zoopla notes that just 4% of homes for sale are over £1.5 million, but speculation about possible taxation of capital gains may impact buyer decisions at this end of the market in the short term.

Regional differences: average time to sell a home

The time a property stays on the market is a key indicator of housing market health and is directly linked to house price inflation.

In northern regions, a combination of fewer homes on the market than a year ago and better affordability is leading to quicker sales times. For example, the average time to sell a home (in terms of moving from a listing to an agreed sale) in the North West and North East of England in July was 27 days, 23% faster than the national average of 35 days, says Zoopla.

This is helping fuel above average annual house price growth in these areas, which is sitting at 2.7% and 2.1% respectively.

In London and the South East, the average time to sell a home is 39 and 40 days respectively. The South West, Eastern and East Midlands are third slowest, at 38 days.

Longer sales times are creating less pressure on house prices in the south, where annual house price inflation sits as low as 0.3% in the South East and South West, according to Zoopla.

Note that once a property has moved to an agreed sale, it usually takes a further four to six months for a sale to complete.

Donnell comments: “Buyers have much greater choice to choose from, especially across areas of southern England. There is a clear link between buyer choice and price inflation and how long it is taking homes to sell.

“Sellers need to understand local market conditions when considering how to market their home, setting the right price and how quickly they would like to sell. The risk of being too ambitious on price is your home taking more than twice as long to find a buyer – or not selling at all.”

UK house price outlook for 2025

Zoopla predicts that UK house price inflation will continue in a range of 1.5-2% over the rest of the year.

“There are signs that prices are firming in southern England but price growth is slowing across northern regions,” notes Donnell.

Meanwhile, Knight Frank expects price growth this year “to hover not far above zero” due to “supply still outweighing demand as autumn approaches”.

Could London house prices outperform the rest of the UK? Find out why one expert is forecasting strong growth in the capital