House price growth in the UK has slowed and sales have dropped for the first time in two years as more buyers adopt a ‘wait and see’ strategy, according to a new report.
Zoopla found that the usual Christmas slowdown has “begun six to eight weeks early”, with buyer demand down eight per cent and sales agreed down three per cent year on year.
The slowdown in market activity is concentrated in the higher sales price bands, with a sharper decline in sales, listings and buyer demand for homes priced above £500,000.
“Here’s the hard evidence showing what we already knew – Labour’s fearmongering about what’s coming in the next Budget has caused an otherwise booming housing market to contract,” Simon Gerrard, chair of Martyn Gerrard Estate Agents, said.
He described the kite-flying of possible changes to property taxes earlier this summer as a “massive own goal” and “poor messaging”.
“We’re now facing multiple months of subdued transactions, which will only reduce the overall tax take,” he added.
A ‘temporary pause’
However, property experts said that strong underlying demand meant that the housing market would likely return to normality after the budget as buyers settle into a more certain environment.
“Once there is greater clarity around taxation and economic policy, we expect confidence to return,” Guy Gittins, CEO at London estate agent Foxtons, said.
“The current slowdown should therefore be viewed as a temporary pause rather than a fundamental shift in market dynamics.”
Amy Reynolds, head of sales at Richmond estate agency Antony Roberts, cautioned that this ‘bounce’ would likely come in the New Year.
“Nothing will happen in November, and then we are so close to Christmas it’s hard to see how a post-budget bounce will have an impact this year,” Reynolds said.
Mansion tax talk ramps up
However, this optimistic scenario for the housing market in 2026 is reliant on the Autumn budget containing no setbacks for housesellers.
Talk of a mansion tax, for example, has ramped up again over the past few days, with housing secretary Steve Reed refusing to rule it out.
Former Bank of England governor Mervyn King has criticised the policy, mooted to include a fresh tax on property value about £2m, as incoherent.
Andrew Teacher, co-founder at Lauder Teacher, said: “On top of Brexit and the mountain of levies and regulation that has brought housebuilding to a standstill, a failure to read the room [on a mansion tax] will simply put the final nail in the coffin of the government’s housing targets.”
“Instead, a radical reform to council tax and business rates is what is needed, with ministers waking up to smell the coffee and using the political capital they have to make genuine, radical reform to those policies that will make a real difference.”