Soaring stamp duty costs dampen house price growth
Housing market activity has surged but price growth has slowed as high costs bite into buyers’ budgets.
Buyer demand rose 11 per cent and agreed sales rose eight per cent year on year but house prices grew by just 1.3 per cent, according to Zoopla’s latest house price index.
Higher stamp duty costs now impact 83 per cent of homeowners and 41 per cent of first-time buyers, up from 19 per cent last year, Zoopla said.
In London, the median first-time house purchase tipped over the threshold for paying stamp duty in April, meaning the average buyer needed to shell out an additional £6,250 – something only 15 per cent of first-time buyers in London can afford, according to a survey from Fairview Homes.
“Many more home buyers are paying stand duty since April and want this extra cost reflected in the price they pay,” Richard Donnell, executive director at Zoopla, said.
But Donnell added that steady mortgage rates, plus less stringent affordability testing, has “boosted buying power and is supporting more sales despite increased uncertainty”.
Prices on track to grow one per cent this year
Zoopla has previously predicted two per cent house price growth this year, but revised it to one per cent in the face of rising costs.
“Greater supply of homes for sale and mortgage rates remaining higher than expected are the key reasons for weaker growth,” Donnell said.
“Low house price inflation is not a bad thing so long as there is enough market confidence for people to list their homes and make bids to buy homes.”
Savills, too, has cut its estimate for house price growth in 2025 from four per cent to one per cent, and its 2026 estimate from 5.5 per cent to four per cent.
“In light of [slowing house price growth] and the potential for more buyer uncertainty in the run up to the autumn Budget, we have revised our house price forecast for this year… a lot has changed over the last six months,” Lucian Cook, head of residential research at Savills, said.
CEO of Andrews Property Group David Powell called for “immediate remedies” to help Brits buy houses.
“The Government will certainly need a more flamboyant market to provide confidence to developers to build towards the targeted 1.5 million homes.
“Without a reduction in interest rates or Government intervention its difficult to see any material change for [the second half of 2025]… The obvious and immediate route is to create a more palatable and permanent solution to stamp duty to help ignite the market,” he said.