Rising taxes in London's real estate sector remain unphased
The UK property market is showing signs of stabilization following the recent Autumn Budget and associated tax changes, according to industry experts. While the outlook remains cautious due to anticipated further tax adjustments, the sector has shown encouraging growth in the latter half of 2025.
Market Stabilization and Growth
After a cooling period linked to early 2025 tax changes, such as Stamp Duty Land Tax threshold reductions, the UK housing market returned to a more typical pace in summer 2025. July saw the highest monthly house price growth since January, with prices increasing by 0.4%, reaching an average of £298,237. This growth was partially offset by lower borrowing costs and rising wages, resulting in a year-on-year increase of 2.4%.
Tax Changes and Buyer Costs
The significant reduction in Stamp Duty thresholds from April 1 led to increased buyer costs and a decline in transactions, with a 37% drop initially. However, activity is gradually picking up, with May seeing only a 17% drop. The abolition of the non-domicile tax regime for long-term UK residents has reduced the UK market’s appeal for foreign investors, but it has been noted for improving tax fairness.
Interest Rates and Market Confidence
The Bank of England's rate cut to 4% has been described as a "timely step" by property finance experts, bolstering market confidence ahead of expected challenges from the Autumn Budget. Experts remain optimistic that interest rates will continue to drop from their current peak of 5%.
Future Taxation Concerns
Experts anticipate the Autumn Budget could bring further tax rises to create fiscal headroom, including possible cuts to capital gains tax allowances on property sales and changes to inheritance tax thresholds. These could add financial pressures and affect future trends, particularly for landlords and high-value homeowners.
Supply and Demand Dynamics
While demand for new builds remains stable and owner-occupier demand is increasing (helped by mortgage costs undercutting rents), the market still faces an oversupply of properties on sale, with new homes for sale 15% above the five-year average so far in 2025.
Despite these potential challenges, property market experts view the UK housing sector as stabilizing in mid-2025 with promising signs of price growth and buyer activity returning, supported by lower interest rates and wages growth. However, the outlook remains cautious due to anticipated further tax changes in the Autumn Budget which could add financial pressures and affect future trends.
On September 26, Century Capital, a UK property lender, hosted a breakfast briefing at The Arts Club in Mayfair, gathering influential voices in the property sector to debate the future of the market. Despite potential upcoming tax changes, experts such as Paul Munford, CEO and founder of Century Capital, highlighted the strong underlying fundamentals, particularly in London. Goldman Sachs forecasts interest rates to drop down to 3.4% in 2025, and economists project that interest rates will see one, if not two, reductions before the end of the year. Paul Munford expects the easing of interest rates to drive confidence and transaction levels across the board.
Experts agreed that Labour's proposed increase in taxes, such as capital gains and stamp duty, could negatively impact the market, but they are not abandoning the idea. James Tumbridge, a barrister and partner at Keystone Law, stated that foreign investors are eager to see the effects of the upcoming Autumn Budget but are not rejecting the UK, especially London, as a major investment destination.
Real-estate investments in the UK are showing promising signs of growth, with the housing market stabilizing in mid-2025 and buyer activity returning. This is partially due to lower interest rates and rising wages, as stated by property finance experts.
In the business world, tax adjustments such as the reduction in Stamp Duty thresholds and potential future changes in the Autumn Budget can significantly affect the real-estate market, as highlighted during the Century Capital breakfast briefing in September.
