UK house price growth slows amid Budget uncertainty

Annual UK house price growth has slowed amid property tax hike fears expected in next month’s Autumn Budget.

The latest house prices data from the Office for National Statistics (ONS) showed prices rose by 3% in the 12 months to August, down from growth of 3.2% in the year to July.

This puts the average value of a home in the UK at around £273,000.

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Meanwhile, prices in the UK rose by 0.8% between July and August, compared with a higher 1% over the same period last year.

In England, house prices grew in every region in the 12 month period to August, apart from London, where they fell by 0.3%.

It comes as fears grow Rachel Reeves could reportedly announce a new tax on the sale of homes over £500,000, which would replace Stamp Duty, and remove the capital gains tax exemption on primary residences worth more than £1.5million.

The Chancellor is reportedly looking to plug a more than £40 billion black hole in the government’s finances, ruling out increases to income tax, VAT and National Insurance.

Ministers have also pledged to build 1.5 million new homes by 2029 in a bid to drive down house prices, but there are concerns the target might not be met.

Commenting on the latest ONS figures, Chris Storey, chief commercial officer at Atom Bank, said: “The recent slowdown in activity is clear from these figures, even with house prices edging up.

“The rumours about wholesale changes to the Stamp Duty regime - and potentially its complete replacement with a new form of property tax - have understandably caused some potential buyers to put their plans on hold.”

He added: “Housing production looks to be significantly down on the promised 1.5 million new homes during the course of this Parliament, and until we dramatically improve that production rate there will remain sharp upward pressure on prices.

“In the meantime, it’s vital that lenders go further in supporting borrowers who are underserved by mainstream lenders.

“A broader choice of products with higher Loan to Values and a more forgiving attitude to credit blips will mean that rising house prices don’t kill off ownership dreams.”

How are house prices changing across the UK?

Across England, Wales and Scotland, annual house prices grew the most in Scotland, according to the ONS, showing a 4% jump.

The average value of a property there was £194,000 in August.

House prices in the 12 months to August went up by 2.9% in England, with the average home value there £296,000.

Property prices in Wales increased by 2% in the 12 months to August - the average price of a home there was £211,000.

Annual house price growth in England was driven by the North East and North West regions, which saw 6.6% and 4.5% rises, respectively.

However, London house prices fell by 0.3%, and grew by just 0.1% between July and August, amid concerns over affordability and mortgage rates.

In Scotland, house prices between August 2024 and August this year surged in Na h-Eileanan Siar and Renfrewshire, with 12.1% hikes there.

However, the City of Aberdeen and South Ayrshire both saw property prices drop, by 4.3% and 0.3%, respectively.

Annual property prices in Wales were driven by growth in Bridgend and Swansea (6% and 5.5%) and offset by house price reductions in Merthyr Tydfil (8.5%) and Ceredigion (5.3%).