Property tax overhaul could hit London and South East hard

Rumoured property tax changes which could be announced in the Budget would pile further pressure on London and the South East's housing markets, which are already 'performing less strongly', Rightmove said. There has been speculation Rachel Reeves could introduce a number of major property tax changes in the Autumn Budget, including, among others, a national proportional property tax on homes worth over £500,000 or the imposition of national insurance contributions for landlords.

Coleen Babcock, a property expert at Rightmove, said: 'Rumours of property tax changes began swirling in mid-August, and with the Budget itself not arriving until the end of November, this kind of extended uncertainty can affect market activity, especially in the higher price brackets.' While Rightmove said it had not detected any 'major shifts' in the property market yet, it said those potentially affected were likely to be 'reassessing their short-term and medium-term plans.' Babcock added: 'Our analysis highlights how London and south England-centric the changes would be, and these are the areas that are already performing less strongly.'

Rightmove’s analysis highlighted how some of the proposed tax changes would disproportionately affect London and higher-priced areas, 'and risk exacerbating regional divides'. According to the property portal's analysis, if the government changed the way stamp duty worked on properties over £500,000, nearly 60 per cent of sales in the capital would be affected, against 22 per cent across England and just 8 per cent in the North East. Rightmove said: 'Furthermore, more than one in ten homes, or 11 per cent, in London are priced at £1.5million or more and would be subject to the rumoured mansion tax, versus an average of just 2 per cent outside the capital.'

The average listing price of homes up for sale across Britain rose by £1,517 or 0.4 per cent this month to £370,257, Rightmove's latest analysis showed. But, seller asking prices were 0.1 per cent lower than at the same point a year ago following 'several months of muted price growth'. The dip in annual prices has been driven by London and the south of England, with both lagging compared to other locations. Competitive pricing is 'even more vital' in the south of England compared to elsewhere, according to the findings. The number of homes for sale in the south of England was up per cent on 2024 levels this month, compared with 2 per cent elsewhere, and it took an average of five days longer to find a buyer.

But, the number of sales being agreed was 4 per cent higher than this time last year. In the south of England, it was still up 3 per cent year-on-year, while up by 5 per cent across the rest of Britain. The West Midlands was the only more northern region to record an annual drop in new seller asking prices. In the south west of England, prices were down 1.3 per cent compared with last year, while in the north west they were up 3.2 per cent.

Rightmove said: 'The decade-high number of homes for sale is more pronounced in the south of England, contributing to the lower pricing, as sellers look to stand out among the more plentiful competition. The number of homes for sale in the south of England is up by 9 per cent on this time last year, compared to 2 per cent across the rest of Great Britain.' Babcock, said: 'We’d expect to see a slight uptick in new seller asking prices in September, with the traditional back to school season boosting activity heading into autumn. This year’s 0.4 per cent September price rise is a little lower than the norm, which is an average of 0.6 per cent at this time of year. However, prices have now dipped slightly from where they were at this time last year after a summer of competitive pricing by sellers, and it’s the south of England which is driving this small dip.'

She added: 'It’s the sensible and attractive seller pricing we’ve been reporting which has been helping to drive more sales activity compared to last year. Static house prices, rising wages, and lower mortgage rates all assist buyer affordability, which has led to an increase in the number of sales agreed compared to a year ago.' Jeremy Leaf, a north London estate agent and former RICS residential chairman, said: 'Rightmove, though a historically-accurate identifier of market trends and enjoying 90 per cent-plus agent coverage, only tracks asking prices.

'Asking prices are not achieved values but often owners’ or agents’ aspirational starting points and will determine if genuine buyers are attracted. In our offices, prices may still be rising marginally in more affordable areas but are softening elsewhere. We are still agreeing sales but the amount of choice and some unrealistic vendor ambitions are compromising activity. Unfortunately, only some vendors are getting the message. Unless your property is realistically priced you won’t stand out from the sizeable crowd and give yourself the best possible chance of attracting offers.'

Tomer Aboody, director of specialist lender MT Finance, said: 'The affordability matrix still shows that first-time buyers are struggling to get on the ladder, with the average property price still higher than the average couple’s 4.5 times income multiple. Surely this has to change so that first-time buyers can afford to purchase their first home?'

'Stamp duty reform is urgently needed to allow more homes to come to the market, so that downsizers are encouraged to sell and enabling families to buy. This will also free up more affordable flats and smaller houses for first-time buyers. The property cycle is a huge focal point of the economy in the UK, and any government discouraging this, or not actively trying to bolster this, will see the economy falter.' On 7 August the Bank of England cut interest rates from 4.25 per cent to 4 per cent, the lowest level since March 2023. Analysts broadly expect September's interest rate decision to be a hold rather than a cut.