London housing market experiencing stamp duty ‘hangover’

London’s housing market is experiencing a stamp duty "hangover" (Getty Images/iStockphoto)

London’s housing market is experiencing a stamp duty "hangover" with a significant drop in buyer demand, according to a new Zoopla report.

This decline contrasts with the rest of the UK, where demand remains robust.

The report attributes this slump to the looming changes in stamp duty thresholds. From April, the nil-rate threshold for first-time buyers will decrease from £425,000 to £300,000.

Zoopla estimates this change will impact a substantial number of potential homebuyers in the capital. Around eight in 10 first-time buyers in London are expected to pay stamp duty after April 2025, compared to less than half under the current rules.

The changes to stamp duty, applicable in England and Northern Ireland, are expected to disproportionately affect regions with higher house prices, such as London.

The changes to stamp duty, applicable in England and Northern Ireland, are expected to disproportionately affect regions with higher house prices, such as London (AFP via Getty Images)

It said the London housing market is “suffering something of a hangover in the wake of the rush to beat the April 1 stamp duty deadline.

“This has created a lull in market activity, with demand 3% lower over the last year. The impact is more pronounced amongst first-time buyers, hitting price rises in the capital.”

Zoopla suggested that many first-time buyers brought forward decisions to buy homes late last year to avoid paying higher stamp duty from April 1, creating a lull in first-time buyer demand as the deadline approaches.

Overall, the annual rate of UK house price growth slowed to 1.8 per cent in February, down from 1.9 per cent in January. The average price of a UK home is £267,500, Zoopla said.

The website also said that some hotspots popular for second homes, such as Truro in Cornwall and Torquay in Devon, have seen a dip in house prices.

At the other end of the spectrum, house prices are rising particularly quickly in locations such as Motherwell and Kirkcaldy in Scotland and in Wigan, Blackburn, Lancaster and Bradford in northern England, the website reported.

In all these areas, average house prices are between £130,000 and £220,000, which is lower than the national average, the report said.

The report said: “In northern England, the Midlands and Scotland, buyer demand is 10% (plus) higher than a year ago, while the supply of homes for sale has grown more slowly. This is supporting above-average house price inflation.”

Richard Donnell, executive director at Zoopla, said: “House price growth is set to moderate further as supply grows and the extra costs of stamp duty in England feed through into house prices.

“A slowing in house price growth is not a major concern, although the market needs some growth in prices to encourage sellers to come to market and buyers to make realistic offers on homes for sale.

“There is plenty of demand for homes but also lots of choice.

“Households looking to sell their home in 2025 need to be careful when setting their asking prices if they are to attract sufficient demand to agree a sale.

“It’s important to seek the advice of local estate agents to inform the most suitable pricing strategy for every home.”