Property tax threat 'risks slowing housing market down' as buyers 'wait and see'

Speculation over property tax changes could slow the housing market down further, leading property platform Zoopla has warned.

Rumoured moves include replacing stamp duty with an annual property tax on homes valued above £500,000 and extending capital gains tax to properties over £1.5 million. According to the property platform, the uncertainty could prompt some buyers and sellers - particularly wealthier homeowners, second-home buyers and landlords - to adopt a "wait and see" approach. While Zoopla’s latest House Price Index showed activity has been relatively resilient over the past year, with sales agreed up by 5% and demand up 4%, it warned that ongoing debate over property taxation could slow momentum this autumn.

Approximately a third of homes currently listed are priced above £500,000, with the impact most likely to be felt more strongly in London and the South East.

Zoopla added: "Capital gains are not taxed on main residence sales but do apply to second home owners and landlords. Just 4% of homes for sale are over £1.5million, but speculation about possible taxation of capital gains may impact buyer decisions at this end of the market in the short term."

House price growth has already moderated, rising just 1.3% year-on-year - below the 2.1% pace seen at the start of 2025, though ahead of last year’s 0.6%. The average UK house now costs £270,600, just £3,560 more than a year ago.

Zoopla noted that with more choice on the market - a 10% increase in supply compared with last year - sellers will need to price realistically to secure deals.

Richard Donnell, executive director at Zoopla, said: "There is plenty of demand for homes and more people are looking to move. However, buyers also have much greater choice to choose from, especially across areas of southern England. There is a clear link between buyer choice and price inflation and how long it is taking homes to sell.

“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.

"We expect UK house price inflation to continue in a range of 1.5% to 2% over the rest of the year."

Stuart Bailey, head of London super-prime sales at Knight Frank, added: "The autumn market is about to begin and this year will be shrouded by speculation of how to decipher the government’s messaging on property tax.

"Either way, sentiment impacts decision making and the longer a property takes to sell (if mis-priced, for example), the bigger the risk of something going wrong, as buyers become ever more hesitant, and the risk of market slowdown increases."

Any changes to property taxation are likely to be announced by Chancellor Rachel Reeves in this year's Autumn Budget. This will take place in October or November - the date is yet to be determined.