Zoopla House Price Index: Budget tax speculation has stalled top end of the housing market

Homebuyers and sellers appear to be delaying moving decisions amid uncertainty about tax changes in the impending Autumn Budget, Zoopla claims.

Chancellor Rachel Reeves is rumoured to be planning an overhaul of stamp duty in her Autumn Budget, which could see the controversial levy replaced with a national property tax on the sale of homes above £500,000.

There are also suggestions that capital gains tax could be applied to the sale of homes above £1.5 million.

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These rumours, Zoopla claims, are stifling activity at the top end of the market.

The property website’s latest House Price Index shows buyer demand and new listings have both declined for homes priced above £500,000.

Properties priced over £500,000 have seen a 4% drop in buyer demand and a 7% reduction in new listings over the past five weeks.

Similarly, demand for homes worth above £1 million has fallen by 11%, while new listings are down by 9%.

This is in contrast to the rest of the market, where demand and supply remain stable, Zoopla said.

The research suggests the pause is most pronounced in high-value markets like London and the South East.

This has pushed house price growth down to 1.4% in August, a decline from 1.9% in December 2024.

Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “In our offices, we’re hearing time and again how concerns about possible tax increases in the Budget – particularly for high-end homes – are prompting buyers and sellers to ‘sit on their hands’, though our existing sales are certainly not collapsing.

“Demand remains relatively healthy for more affordable homes but is slowing in parts of the market which were already underperforming.”

What is happening with UK house prices?

While average house price growth may be slowing nationally, there are parts of the country where the market is still performing.

House prices are rising fastest in markets where average prices are below £200,000, Zoopla said.

Outside of Northern Ireland, house prices have risen by more than 4% over the past five weeks in five postal areas including Kirkcaldy to the north east of Edinburgh, Oldham in North West England, Tweeddale in the Scottish Borders, Motherwell to the south east of Glasgow and Llandrindod Wells in Wales.

Prices registered annual falls of 1% across southern England led by second home hotspots such as Bournemouth , Truro, Exeter and Torquay alongside parts of central London.

This has been attributed to extra council tax changes for second homeowners.

Tom Bill, head of UK residential research at Knight Frank, said: “A combination of high supply and a creeping sense of uncertainty as the Budget approaches means the pressure on prices is downwards at the moment.

"Mortgage rates have been stable, which has supported demand, but we would expect a re-run of the hesitancy we saw last year as 26 November approaches and have recently downgraded our 2025 UK forecast to 1% from 3.5%.

“Supply is high as a growing number of landlords sell due to the tougher legislative environment in the lettings sector, sales that were delayed because of the general election in 2024, more financial distress in the system as rates normalise and an overhang of stock from April’s stamp duty cliff edge. It will mean sellers need to be particularly realistic with their asking price just to get buyers through the door for a viewing.”

Is now a good time to buy a property?

House price growth has been slowing since stamp duty thresholds changed in April, pushing up the cost of buying a property.

This has affected purchasing power among buyers and many may now be waiting until after the Autumn Budget to see if stamp duty will be shifted to sellers.

It is also a tricky time for sellers, particularly in prime markets, where data from Savills shows the prospect of paying tax on the sale of homes worth above £1.5 million is hitting sentiment.

A Savills survey of almost 1,000 prospective prime buyers and sellers revealed that 37% had become less committed to buying in the next six months, the lowest level in five years, directly as a result of tax speculation. In contrast, only 10% had become more committed to moving in that period.

There is one silver lining as recent interest rate cuts have pushed down mortgage pricing, and experts warn there are downsides to waiting.

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 changes 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”.