Speculation over tax plans causes sharp decline in buyer activity and southern house price falls
Property market demand has contracted significantly due to concerns surrounding potential dwelling-related taxation, the latest Zoopla House Price Index has indicated.
The past four weeks to Nov. 23 witnessed a 12% reduction in purchasing interest and a corresponding drop in agreed transactions relative to the same period last year.
The fluctuation in market sentiment has produced divergent outcomes across the country. The South of England, where property valuations are typically higher, has experienced the first year-on-year price decline in 18 months. London registered a marginal fall of 0.1%, with identical declines observed in the South East. The South West saw a more pronounced drop of 0.2%.
By contrast, regions in the Midlands and North have maintained upward momentum, with North West valuations rising by 2.9% annually. The national average stands at £270,200, representing a 1.3% increase year-on-year.
The landscape shifted following Wednesday's Autumn Budget announcement, which addressed concerns that had generated considerable uncertainty since the summer months. Officials declined to introduce a fresh annual levy on residences valued above £500,000, an outcome that will benefit approximately 210,000 properties currently listed for sale at this threshold. The shelving of this proposal is anticipated to catalyse renewed market participation, particularly in the southern counties where higher-valued stock predominates and where supply-related pressures on prices have intensified.
Despite this respite, established taxation mechanisms continue to create friction for purchasers. Stamp duty thresholds, frozen since 2014, now capture an expanding proportion of transactions as valuations have appreciated by 47% during this 11-year interval. Across the country, the proportion of residential acquisitions by existing proprietors incurring duty exceeding 2.5% of the purchase value has increased from one-fifth to one-third of all sales since 2019.
"The Budget bark was worse than the Budget bite for the housing market," said Richard Donnell (pictured right), executive director at Zoopla. "Home buyers and sellers will welcome the end of the uncertainty that has stalled housing market activity since the late summer.
"Our data shows the underlying demand to move home remains strong. With greater certainty we expect a rebound in housing market activity that builds into the new year with households who paused home moving decisions over recent months return with greater confidence.
"The removal of the threat of a new annual property tax from 210,000 homes is particularly positive for the market and will help revive activity in higher-value areas across southern England where house prices are under pressure."
David Powell, chief executive of Andrews Estate Agents, offered a more cautious perspective. "After months of speculation, I am disappointed the government has missed this opportunity to address the challenges around stamp duty and affordability," he said.
"There will be much disappointment around the £2 million-plus mansion tax and it's likely the South will get hit the hardest, we will eagerly await how this impacts the market and the unintended consequences that may follow.
"I suspect house price growth in the South may remain static in the short term while the market adjusts to the new normal. I expect the market to bounce back from any damage caused by leaked or shelved policies leading up to the government's Budget and we will see activity levels increase across the South throughout 2026."
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