UK Property Market Sees Sharpest Price Drop Since 2023 as Stamp Duty Changes Impact Demand

House prices experienced their most significant monthly decline in over two years, dropping 0.8 per cent to £271,619 in June, according to the latest Nationwide house price index. The decrease, more substantial than economists predicted, reflects the immediate impact of recent stamp duty modifications.

The yearly growth rate in property values decelerated to 2.1 per cent in June from 3.5 per cent in May. Robert Gardner, Nationwide’s chief economist, attributes this softening to reduced demand following April’s stamp duty adjustments. The revised taxation framework now requires homebuyers in England and Northern Ireland to pay stamp duty on properties exceeding £125,000, down from the previous £250,000 threshold.

Regional variations remain pronounced across the UK property landscape. Northern Ireland led with 9.7 per cent annual growth in the second quarter, albeit down from 13.5 per cent in the first quarter. Scotland recorded 4.5 per cent growth, while Wales and England showed more modest increases of 2.6 per cent and 2.5 per cent respectively.

Despite current market headwinds, industry experts maintain an optimistic outlook. Gardner suggests activity will likely intensify as summer progresses, citing supportive conditions including low unemployment rates, rising real wages, and anticipated reductions in borrowing costs. The Bank of England’s decision to maintain interest rates at 4.25 per cent, combined with market expectations of further rate cuts to 3.75 per cent by year-end, supports this positive perspective.

Knight Frank’s head of UK residential research, Tom Bill, emphasises the current market dynamics: “The legacy of the March stamp duty cliff edge has created high supply and softer demand, pressuring house prices downward. While modest single-digit growth is expected by year-end, sellers must recognise the present buyer-friendly market conditions when setting asking prices.”