Sellers Cut House Prices in Largest Drop for Over a Decade Amid Budget Tax Fears

The UK housing market is witnessing the most significant price reductions from sellers in thirteen years, as uncertainties loom over forthcoming tax changes in the budget and sharp declines in high value property transactions persist. New data reveals that asking prices for newly listed properties have dropped by an average of £6589, or 1.8 percent, over the past month to a mean of £364833. This steep reduction surpasses the average 1.1 percent decline seen at this time of year over the previous decade, marking the largest such fall since 2012.

Currently, sellers with homes that have remained on the market are following suit, with 34 percent of properties for sale having had their prices trimmed at least once. The reductions average 7 percent, both the highest figures seen since February of last year. These developments coincide with widespread speculation that the Chancellor, Rachel Reeves, is poised to increase property taxes. Potential measures under discussion include the introduction of a mansion tax on properties valued above £2 million, the cessation of capital gains tax exemptions for primary residences, and a hike in council tax rates. The likelihood of these measures has been heightened as the Chancellor recently opted against raising income tax, now faced with the challenge of addressing a £20 billion shortfall in the public purse.

Separate analysis by the EY Item Club forecasts mortgage lending growth will decelerate in 2026 to 2.8 percent, down from a projected 3.2 percent this year, influenced by constrained affordability and pressures on real incomes. A market rebound is anticipated in 2027, with lower interest rates and recovering incomes expected to strengthen demand.

Rightmove data highlights continued declines in the higher end of the market, with sales agreed for homes above £2 million, the perceived threshold for a mansion tax, down 13 percent year on year. Transactions for properties priced between £500000 and £2 million, susceptible to potential stamp duty and capital gains tax adjustments, have fallen by 8 percent. Even the sub £500000 market, while less exposed to tax rises, has seen a 4 percent annual drop in sales.

The uncertainty surrounding the autumn budget has contributed to a decade high in the number of unsold homes, as many prospective buyers pause to assess the impact on their finances. The delayed budget, later in the year than usual, is causing considerable distraction, prompting many to hold off on decisions. Some in the industry note a sharp reduction in overall transactions, yet vendors close to exchange are accelerating completions ahead of any tax announcements. Knight Frank figures indicate exchanges fell 10 percent in the quarter to October, while transactions of homes above £5 million actually increased by 14 percent as buyers sought to preempt possible new levies.

Conflicting motivations between buyers and sellers are becoming apparent. Sellers wishing to avoid possible capital gains tax on primary homes prefer to finalise sales promptly. Buyers, meanwhile, are more likely to postpone transactions pending budget clarity. Mortgage markets have also seen increased activity, with remortgagers seeking to secure rates before any potential post budget volatility, especially given recent market turbulence. The complexities and timing of the forthcoming budget remain a critical factor shaping market sentiment and transactional behaviour in the UK property sector.