House price growth slows as stamp duty costs rise

Despite a robust rise in homebuyer interest and sales agreements, the UK’s housing market is grappling with a slowdown in price growth, Zoopla says.

Its research shows that the decline is largely due to rising stamp duty costs and a surge in available properties.

The platform’s latest House Price Index shows that buyer demand has risen by 11% and sales agreements by 8% compared to last year, bucking the usual summer lull.

However, the annual rate of house price inflation has dropped to 1.3%, with the average UK home now valued at £268,400, a modest £3,350 increase from 12 months ago.

Price rises kept in check

Richard Donnell, an executive director at Zoopla, said: “The housing market is broadly in balance. We’re seeing healthy levels of demand and sales, but this isn’t sparking faster price inflation.

“In fact, more homes for sale, particularly across southern England, is re-enforcing a buyer’s market, keeping price rises in check.

“Many more home buyers are paying stamp duty since April and want this extra cost reflected in the price they pay.”

He added: “While mortgage rates are holding steady, less stringent affordability testing has boosted buying power and is supporting more sales despite increased uncertainty.”

More homes for sale

Zoopla says the market is experiencing a big shift, with a 12% rise in the number of homes for sale, averaging 37 properties per estate agent branch.

This increased supply has created a buyer’s market, boosted choice and keeping offers competitive.

Recent changes in mortgage affordability assessments have also fuelled activity, allowing buyers to borrow up to 20% more at the same interest rate compared to three months ago.

This has spurred more people to secure purchases before the summer holidays.

More buyers see costs rise

However, the end of temporary stamp duty reliefs in April has pushed up costs for many buyers, particularly in England and Northern Ireland.

Now, 83% of homeowners face stamp duty on new purchases, up from 49% before April, with additional costs averaging £2,500 per transaction.

First-time buyers are also affected, with 41% now liable for stamp duty compared to 19% previously.

In London, the average first-time buyer faces a £6,100 stamp duty bill, a stark contrast to zero before April.

These costs are an issue in southern England, where they are dampening price growth.

House prices by region

Regional house price differences are pronounced, with Northern England, Scotland and Wales seeing stronger price rises.

They are ranging from 2% to 3% annually, with Northern Ireland leading at 6.1%, driven by a 7.8% rise in Belfast.

In contrast, southern England is experiencing sluggish growth, with London and the South East at 0.2% and the South West at 0.3%.

Cities like Truro, Torquay and Exeter are witnessing notable price declines of 1.3%, 1.2% and 1.1% respectively.

Mr Donnell said: “At the start of the year, we predicted house prices would rise just 2%, at the lower end of forecasts for house price inflation.

“Prices are on track to be 1% higher over 2025, half the level forecast.”

Stamp Duty hit prices

Propertymark’s chief executive, Nathan Emerson, said: “As the year advances, it remains upbeat to witness greater levels of market activity when compared to only 12 months earlier.

“Both affordability and consumer confidence continue to steadily improve, with more competitive mortgage products gradually finding their way to the market.

“However, higher Stamp Duty costs have impacted house prices in some cases, and this is creating additional regional disparities in terms of house price growth.”

He adds: “The UK government may need to reconsider the real-world effects that increased Stamp Duty thresholds across England and Northern Ireland have caused, to better invigorate the market across the long-term.”

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