Speculation over government tax reforms is beginning to cast a shadow over the upper end of the UK housing market, according to new figures from Zoopla.
The property portal reported that demand for homes priced above £500,000 has slipped by 4 per cent compared with last year, while the number of buyers searching for £1 million-plus homes has fallen by 11 per cent over the past five weeks. Sellers are also showing caution, with listings for homes above £500,000 down by 7 per cent year-on-year and those over £1 million down by 9 per cent.
At the heart of the slowdown is speculation that November’s budget could bring sweeping changes to property taxation. Among the proposals discussed in the press is the replacement of stamp duty with an annual levy on homes sold for more than £500,000. Richard Donnell, executive director at Zoopla, said such speculation, although unconfirmed, “has been enough to unsettle parts of the market”.
The uncertainty is hitting prime property hardest. Savills reported that buyer sentiment at the top of the market has sunk to its lowest level in five years, with homes valued above £10 million experiencing the sharpest downward price pressure. Prices for so-called “prime” homes in central London, broadly those worth £4.5 million and above, fell by 1.8 per cent over the summer — the steepest quarterly decline since the aftermath of the Brexit referendum in 2016. Year-on-year, prices in this bracket are down by 4.7 per cent.
Lucian Cook, head of residential research at Savills, noted that both buyers and sellers are struggling to interpret the potential impact of tax reforms: “There is no guarantee of what is going to prevail.”
While London and the southeast — where £500,000-plus homes are most concentrated — are expected to feel the greatest impact of uncertainty, trends vary across the UK. Average house prices nationally are 1.4 per cent higher than a year ago at £271,000, though this represents the weakest annual growth since last September. In London, the southeast, southwest and east of England, price growth is below 0.5 per cent.
Elsewhere the picture is stronger. House prices have risen 2.8 per cent in Scotland and 3.1 per cent in the northwest of England over the past year. Northern Ireland continues to be the UK’s fastest-growing market, with annual price inflation of 7.9 per cent.
Despite the current slowdown, Zoopla expects overall housing market activity to rise in 2025, buoyed by stabilising mortgage rates. The group forecasts sales volumes to reach 1.15 million this year, the highest since 2022, with average prices expected to rise by between 1.5 and 2 per cent over the course of 2025.
Kevin Shaw, national sales managing director at Leaders Roman Group, said the mere talk of a “mansion tax” has introduced hesitation into the upper end of the market. But Donnell emphasised that the broader market remains largely unaffected for now: “This summer’s speculation has been bigger than usual, leading some buyers and sellers of high-value homes to pause. But activity below that level remains resilient.”
