UK home buyers have returned to the market 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 4% and 7% 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% in December 2024 to 1.4% in August this 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%. 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% increase and the North West is seeing a solid rise of 3.1%.
The average real estate agent now has 36 homes for sale, a 20% increase from 2023 and an 8% rise year-on-year. Additionally, the number of sales agreed continues to rise, up 3% 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.
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 4% drop in buyer demand and a 7% reduction in new listings over the last five weeks. Similarly, demand for homes over £1 million has fallen by 11%, while new listings are down by 9%. 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 8% 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.
Average mortgage rates for a new five-year fixed rate deal are currently between 4% and 5%, and homebuyers can now afford to borrow 20% 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%) in markets where average prices are below £200,000. In contrast, local markets with average house prices above £500,000 are experiencing static prices.
Outside of Northern Ireland, house prices are rising by over 4% in five postal areas including Kirkcaldy to the north east of Edinburgh, Oldham in North West England, Tweeddale covering the eastern side of the Scottish Borders, Motherwell to the south of Glasgow and Llandrindod Wells in Wales, north of Cardiff.
Prices continue to register annual falls of 1% across southern England led by second home hotspots like Bournemouth, Truro, Exeter and Torquay 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.
Richard Donnell, executive director at Zoopla, commented: “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.”
