The UK property market is slowly becoming less of a seller’s market. At least, based upon recent changes in house price trends, following recent changes to the Stamp Duty Land Tax, or SDLT.
Up until earlier this year, property prices in the UK were appreciating at an above-average rate. As recently as March, house prices were experiencing annual appreciation in the high single-digits. Now, however, with more first-time and existing homebuyers now subject to a greater amount of SDLT on property purchases, price appreciation has decelerated.
Homeowners can check out the impact of this change on property prices, by utilizing home valuation tools from Purplebricks.
While this recent development may not be a prelude to a housing market correction, given other factors that may inhibit demand/price appreciation in the quarters ahead, property owners may want to assess whether to sell as soon as possible, or wait out the situation.
SDLT Changes and Their Impact on UK House Prices
Back in 2022, the UK Government implemented a temporary increase in the nil-rate thresholds for the Stamp Duty Land Tax. In effect, this represented an SDLT tax cut, for existing and especially for first time home buyers.
The UK government enacted this cut, as part of efforts to support the country’s housing market, as rising interest rates started to keep non-homeowners locked out of the property market, while keeping existing homeowners locked into their homes, limiting their ability to climb up the property ladder.
However, with this temporary increase sunsetted on 31 March 2025, the prior nil-rate threshold came into effect on 1 April 2025. During the temporary increase, the nil-rate threshold for existing home buyers has fallen back to £125,000, down from £250,000. For new homeowners, First-Time Buyers’ Relief has fallen back to £500,000, down from £625,000.
Ever since, price appreciation has slowed down considerably, and the impact was immediate. According to data compiled by the Land Registry, year on year price appreciation slowed down, from 7% to 3.5%, during April.
Further Headwinds Ahead?
Flash forward to now, and many signs of the house price slowdown persisting. According to more recent data from a major UK estate agent, home prices in June were up by only 0.8% year on year. Sequentially, new seller asking prices in June were down 0.3%.
Although several factors are on the side of home sellers, such as the drop in interest rates since last year, factors that could in theory spur increased buyer demand are perhaps being outweighed by negative factors, such as a reported increase in the number of properties coming on the market.
Based on regional variations in the data, rising inventories may be more of an issue in pricier markets like Southern England and Greater London, where new asking prices have fallen the greatest. In contrast, some regions of the UK, like Wales and the North West, are actually reporting a further year on year increase in average asking prices.
Worse yet, the current trend change in property prices could persist. Why? High rates and increasing inventory, coupled with greater SDLT costs for home buyers, could place further pressure on prices.
The Bottom Line
Since August 2024, the Bank of England has lowered interest rates by 100 basis points. However, it’s unclear whether further rate cuts are forthcoming. Much like the Federal Reserve, the Bank of England’s U.S. counterpart, Britain’s central bank has started to communicate to the public that it plans to take a careful approach to future rate cuts.
Although it’s possible for the Bank of England to speed up rate cuts, if the UK economy experiences a sharp downturn, the impact of such a slowdown on employment and house demand could counter the benefit of lower borrowing rates.
As it may take time for the UK property market to normalize, home owners who are interested in selling but have put it off until now may want to reconsider, if the current slowdown morphs into a more serious situation, such as full-on UK property market slowdown.
