UK Housing Market Cools as Stamp Duty Changes Approach

UK house price growth cooled in October, seeing an annual jump of only 2.4%, down from September's 3.2%.

The deceleration ended up coinciding with the imposition of a 5% stamp duty surcharge on additional properties by the 30 October Autumn Budget. That imposition now has the possibility of disrupting nearly 200,000 transactions across England and Northern Ireland, according to data from recent research.

What Are the Experts Saying?

It is worth noting that house price growth was already slowing down before Rachel Reeves became Chancellor. But the speculations before the Autumn Budget and the announcements after it have made the outlook bleak.

Before the budget, landlords scrambled to offload properties in a panic, expecting a Capital Gains Tax (CGT) squeeze that, in the end, never materialised. But they didn’t escape unscathed.

Although residential properties dodged the CGT bullet, the stamp duty surcharge on second homes jumped from 3% to 5%. With the tax burden on selling unchanged but the cost of buying back now steeper, some landlords might pull back on planned sales, reconsidering whether to offload assets in a cooling market.

This has led some experts to predict a rocky road ahead for the UK housing market. They think the latest budget, with its spike in borrowing costs, threatens to throttle the year’s modest price recovery.

But the true severity of the fallout will depend on two big unknowns: the bond markets' reaction in the coming days and the Bank of England's impending rate decision on Thursday.

Conclusion

Experts anticipate house price growth to slow down due to uncertainty after the recent budget announcements. However, competition among lenders is driving down mortgage rates, which may attract more buyers. And possible interest rate cuts could further boost growth and help stabilise the market, building on the gains made this year.