House prices in London and southern England recorded their first annual fall in 18 months, driven by Budget uncertainty and speculation about property tax increases. Property platform Zoopla reported drops of 0.1 per cent in London and the South East, and 0.2 per cent in the South West.
The decline came as rumours circulated about an annual property tax on homes worth more than £500,000. Over half of London's housing stock would have been affected by such a measure. Instead, the government confirmed a council tax surcharge on properties valued above £2 million, starting in April 2028.
Buyer demand fell 12 per cent in the four weeks to November 23 compared with a year ago. Sales agreed were four per cent lower over the same period. Richard Donnell, executive director at Zoopla, said: «The Budget bark was worse than the Budget bite for the housing market.»
The new surcharge will impose annual charges of £2,500 on homes over £2 million and £7,500 on properties exceeding £5 million. The Treasury expects the measure to raise more than £400 million in 2029-30, affecting fewer than one per cent of UK properties. The government estimates property owners, not tenants, will bear the additional cost on top of usual council tax.
Regional Divide
The housing market showed stark regional differences. The average UK house price rose 1.3 per cent annually to £270,200 in October. Northern regions continued to see growth, with the North West recording increases close to three per cent and other northern areas, Scotland and Wales gaining between two and three per cent.
Donnell said: «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.» He expects activity to rebound into the new year as households return with greater confidence.
Future Uncertainty
Tom Bill, head of UK residential research at Knight Frank, warned the new tax will create ongoing ambiguity. He said: «Until it is introduced in 2028, buyers and sellers face uncertainty around price thresholds and even once valuations are completed, they could be challenged, which would prolong the limbo,»
Bill added: «Over time, more properties will get dragged into the mansion tax net, which means the proportion of terraced houses, flats and semi-detached homes will grow, particularly in the capital,» The post-Budget clarity is expected to allow demand to bounce back following months of speculation.
David Powell, CEO of Andrews estate agent, predicted static house price growth in the South in the short term as the market adjusts. He expects activity levels to increase across the South throughout 2026, with a high supply of homes helping keep prices in check despite anticipated demand recovery.
Note: This article was created with Artificial Intelligence (AI).
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