"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"
- Richard Donnell - Zoopla
Buyer activity in the UK housing market has held up over the past two years, but speculation about potential tax changes is now slowing demand at the upper end of the market, according to Zoopla’s latest House Price Index.
Demand for homes priced above £500,000 has fallen by 4%, while new listings in the same bracket are down 7% compared with a year ago. Homes valued at more than £1 million have seen an 11% drop in demand and a 9% fall in new listings. With a third of homes currently for sale priced above £500,000, the impact is most visible in higher-value areas such as London and the South East.
Overall house price growth has eased from 1.9% in December 2024 to 1.4% in August 2025, leaving the average UK home valued at £271,000, up £4,350 over the past year. Price pressures are weakest in London, the South East, South West, and Eastern England, where growth remains below 0.5%. By contrast, Northern Ireland is recording a 7.9% rise, and the North West is seeing a 3.1% increase.
Average mortgage rates on five-year fixed deals currently range between 4% and 5%. Improved borrowing conditions mean households can afford 20% more than they could six months ago on the same income, underpinning demand in more affordable regions.
House prices are rising fastest in markets where average values sit below £200,000, with a 2.8% increase. In contrast, local markets above £500,000 are largely flat. Five postal districts are posting growth of more than 4%: Kirkcaldy in Scotland, Motherwell near Glasgow, Tweeddale in the Scottish Borders, Oldham in North West England, and Llandrindod Wells in Wales.
Prices remain under pressure in southern England, where annual falls of around 1% are led by second home hotspots including Bournemouth, Truro, Exeter, and Torquay, as well as parts of central London. Higher council tax rates on second homes are pushing more stock onto the market in these areas, weighing on values.
“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,” said Richard Donnell, executive director at Zoopla. “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.”
Kevin Shaw, national sales managing director at LRG, explained, “The housing market has shifted in favour of buyers, with sellers increasingly willing to align with agents’ valuations and to negotiate on price. That balance is welcome for many purchasers, particularly first-time buyers who appear undeterred by April’s increase in Stamp Duty and have benefited from lower interest rates."
"At the upper end of the market, speculation over property tax has created hesitation. The prospect of a so-called mansion tax, combined with wider fiscal uncertainty, has dented sentiment and slowed decision-making somewhat. Other aspects of Zoopla’s research reflect the broader political and economic picture – specifically the reversal of pandemic-driven coastal demand, together with an increase in council tax on second homes in the South West, and a reduction in the number of non-doms impacting demand for second homes in central London."
"Yet price growth in more affordable regions – to which we would add the East Midlands and parts of the North West – demonstrates that much of the market remains buoyant. While tax speculation may leave 2025 relatively flat overall, the fundamentals are stable. A stronger spring market should emerge once fiscal policy is clarified and confidence returns.”
“A combination of high supply and a creeping sense of uncertainty as the Budget approaches means the pressure on prices is downwards at the moment,” commented Tom Bill, head of UK residential research at Knight Frank. “Mortgage rates have been stable, which has supported demand, but we would expect a re-run of the hesitancy we saw last year as 26 November approaches and have recently downgraded our 2025 UK forecast to 1% from 3.5%."
"Supply is high as a growing number of landlords sell due to the tougher legislative environment in the lettings sector, sales that were delayed because of the general election in 2024, more financial distress in the system as rates normalise and an overhang of stock from April’s stamp duty cliff edge. It will mean sellers need to be particularly realistic with their asking price just to get buyers through the door for a viewing.”
Nathan Emerson, CEO of Propertymark, noted, “A slowing in house price growth will be welcome news for those serious about moving home, especially first-time buyers."
"However, there are underlying factors affecting affordability and confidence, such as economic uncertainty and inflation, making people cautious about their finances, and stagnating income and wage growth. Recent changes to Stamp Duty across England and Northern Ireland have also reduced buyer affordability, and rumours of further alterations are bound to create some uncertainty."
"For some, however, especially current homeowners, a slow tapering in interest rates has allowed lenders to introduce more competitive mortgage products and has decreased the monthly cost for those with variable or tracker mortgages, allowing them to refinance to lower rates. We now look to the Bank of England’s next interest rate announcement in November and hope to see positive introductions through the UK Government’s Budget that will help ease affordability pressures for buyers looking to step onto or move up and down the housing ladder.”
“In August, buyers used the holidays to review their finances, refine their search criteria and to view homes they already shortlisted. The number of properties coming onto the market has decreased, however,” said Matthew Thompson, head of sales at Chestertons. “Whilst there was a substantial increase in landlords selling up amid the Renters’ Rights Bill earlier this year, it was a momentary uplift that has now rebalanced. As a result, buyers will find it more challenging to secure a property within their budget and are advised to start their property search as early as possible.”
