Speculation that the chancellor could announce new property taxes in her autumn budget is likely to slow down an already price-sensitive housing market, estate agents have said.
Rachel Reeves is reportedly considering a tax on the sale of homes over £500,000 and the removal of the capital gains tax exemption on primary residences above £1.5m as ways to boost income for the government.
The property website Zoopla said changes to the taxation of homes over £500,000 “may make some buyers consider a wait-and-see strategy. This covers those who may possibly save money on purchases under £500,000 and concern those buying over this level as well.”
It said a third of homes for sale were priced at more than £500,000, with London and the south-east of England in line to be most affected by a change.
The website’s latest monthly snapshot of the property market showed the number of sales agreed was up by 5% year on year in July and that average prices had risen by 1.3%.
One in 10 homes listed had been reduced in price, above the five-year average of 6% of homes. Homes that have been reduced are typically on the market for almost two and a half times longer than those that are priced well when they go on the market, Zoopla said.
Richard Donnell, an executive director at Zoopla, said: “Sellers need to understand local market conditions when considering how to market their home, setting the right price and how quickly they would like to sell. The risk of being too ambitious on price is your home taking more than twice as long to find a buyer, or not selling at all.”
Jeremy Leaf, an estate agent and former chair of the Royal Institution of Chartered Surveyors, said: “The market inevitably lost a little steam over the summer period with so many decision makers away and listings continuing to pile up.”
He said agreed sales were going ahead but added: “Unfortunately, perhaps the government do not appreciate that even rumours of a new property tax can have a detrimental impact on housing market confidence and activity, which we certainly witnessed on the ground since the story broke last week.”
Tom Bill, the head of UK residential research at Knight Frank, said: “A price-sensitive housing market has become a whole lot more price-sensitive over the last fortnight thanks to the speculation around property taxes.”
He said that in the run-up to the budget there could be “weeks of more speculation in a tiresome re-run of 2024 that will keep a lid on transaction activity and stamp duty revenue”.