Zoopla’s latest House Price Index has shown that average prices have fallen across southern England for the first time in 18 months in November.
The property portal said that uncertainty over the inclusion of property taxes in the Budget had led to a drop in buyer demand and sales agreed across the country, leading to a fall in house prices in London and the South.
The rumoured increased tax on homes over £500,000, which didn’t materialise in the Budget, led to a 12% decline in buyer demand year-on-year in the four weeks up to 23 November.
The impact was felt most acutely in southern England, where house prices dropped across London (-0.1%), the South East (-0.1%) and the South West of England (-0.2%).
In contrast, the broader UK housing market continues to show resilience despite Budget-related speculation. Average UK house prices have increased by 1.3% year-on-year, with the average price standing at £270,200. Most regions and counties outside the south of England are registering above-average price inflation, with home values in the North West of England 2.9% higher than a year ago.
Zoopla says that the shelving of any proposals to introduce a new annual property tax on homes over £500,000 has helped reduce uncertainty in the market, providing welcome relief for around 210,000 owners of homes for sale above this level across the UK. This is particularly apparent in southern England, where the greatest proportion of homes valued over £500,000 are located.
But while the threat of wider tax changes has been removed, stamp duty remains a significant hurdle for home buyers, especially in southern England. The stamp duty price thresholds for existing home owners were set in 2014, while house prices are 47% higher over this time. This is creating ‘fiscal drag’ for home buyers in the housing market, with buyers of average-priced homes paying more.
Since 2019, the number of homes bought by existing homeowners where the cost of stamp duty is more than 2.5% of the purchase price has jumped from 21% to 33%. The cost of buying is growing for average home buyers in towns across the south of England and the case for the abolition of stamp duty as part of wider property reforms remains a strong one.
Commenting on the report, Richard Donnell, executive director at Zoopla, said: “The Budget bark was worse than the Budget bite for the housing market. 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.”
