Fall in home buyer demand amid speculation on property taxes
Speculation surrounding property taxes ahead of the Budget has led to a decline in home buyer demand and agreed sales in recent weeks, reports BritPanorama. According to Zoopla, house prices have recorded an annual decrease in London and southern England for the first time in 18 months.
While house prices in more affordable areas continue to rise, the uncertainty about potential taxes, particularly on homes valued at over £500,000, has contributed to a 12% drop in buyer demand and fewer sales during the four weeks leading to November 23 compared to last year.
Despite this uncertainty, measures affecting the housing market directly have proven less impactful than many homeowners initially feared. In the Budget announced on Wednesday, the Government revealed a high value council tax surcharge in England for properties exceeding £2 million, set to take effect in April 2028.
This new surcharge will feature four price bands, starting at £2,500 annually for homes above £2 million, escalating to £7,500 for properties worth over £5 million. It will apply to property owners rather than tenants and is estimated to affect fewer than 1% of UK properties while generating more than £400 million by 2029-30.
Zoopla reported annual decreases in house prices of 0.1% in London and the South East, alongside a 0.2% fall in the South West in October. Conversely, the average UK house price rose by 1.3% annually, reaching £270,200. Notably, house prices in the North West and other northern regions, including Scotland and Wales, have been rising by approximately 2-3% annually.
The report notes an earlier-than-usual start to the Christmas slowdown, with buyer demand now 12% lower than a year ago. However, it mentions that sales agreed are only 4% lower as committed buyers strive to seal deals before year-end.
Zoopla views the absence of proposals for a new annual property tax on homes valued over £500,000 as a “welcome relief,” suggesting that housing market activity may receive a boost at the start of 2026. Sellers in southern England, where homes valued at over half a million pounds are more common, are anticipated to benefit the most; however, the high supply of homes on the market is likely to keep prices stable.
Richard Donnell, executive director at Zoopla, remarked, “The Budget bark was worse than the Budget bite for the housing market.” He indicated that the end of uncertainty since late summer will be welcomed by home buyers and sellers alike. “Our data shows the underlying demand to move home remains strong.”
Donnell further expressed optimism for a rebound in housing market activity as clarity returns in the new year. David Powell, CEO of Andrews estate agent, cautioned that house price growth in the South may remain static in the short term while the market adapts to the new conditions but expects increased activity levels throughout 2026.
With the market adjusting to tax clarifications and ongoing demand, the future will reveal the resilience of home buying patterns across the UK.
In an evolving landscape influenced by economic policies and regional dynamics, stakeholders will need to remain alert to shifts in buyer sentiment and market responsiveness as 2026 approaches.
