House prices suffer biggest August slump in eight years
House prices in the UK have suffered their biggest August drop since 2018, as a usually quiet period for the property market is stifled further by fears of Budget tax rises.
The average house price slumped by two per cent this month to £364,999, according to property portal Rightmove. House prices are down one per cent year-on-year, the largest annual drop since December 2023.
The capital’s housing market continues to be the worst affected by higher mortgage rates and fears of tax hikes, as London house prices fell by 3.1 per cent in the year to August.
House prices across the south of England are down by 1.8 per cent year on year, while the average price in the north has risen by 1.5 per cent in the past year.
Stamp duty weighs on Londoners
Rightmove has slashed its forecast for national house price growth to between zero and minus two per cent.
“The uncertain geopolitical picture, changing mortgage rate landscape, and [the] new Chancellor’s first Budget in October [is] making it difficult to predict the rest of the year,” the property portal said.
London’s drop-off in prices comes despite the highest number of homes being available in the capital in the last 16 years.
The average house in the capital costs about 17 times the national average wage, Rightmove said.
Colleen Babcock, a property expert at the firm, said that Londoners are contending with disproportionately high stamp duty fees. The £450,000 cap on lifetime ISAs weighs heaviest on first-time buyers in the capital, she added.
“Alongside an abundance of choice, the capital faces greater affordability challenges for buyers, through both high price to income ratios and higher taxation,” Babcock said.
Iran war ‘to keep lid on prices’
Rightmove said that the national housing market has benefitted from a “mini Burnham bounce” in recent weeks, as the UK’s new Prime Minister brought a “renewed general optimism” to the market.
But the property portal’s research found that this boost was unable to outweigh the slump in confidence gripping the market, as buyers and sellers brace for potential reforms to property taxes at October’s Budget.
Burnham has previously supported replacing council tax and stamp duty with a land-value tax, though he was forced to rule this out last month after reports that officials were drawing up plans for the reform.
The political speculation weighing on the housing market comes on top of the impacts of the Iran war, which have caused mortgage rates to remain higher than previously expected.
Tom Bill, head of UK residential research at property advisers Knight Frank, said: “Rising mortgage rates and uncertainty around tax rises in the Budget are curbing demand, which is being felt more acutely in parts of the country where affordability is already stretched.
“The unpredictable events in the Middle East mean there is nothing to suggest mortgage rates will drop materially in the short term, which should continue to keep a lid on prices this year.”