Is the UK about to see a house price crash?
04-29-2025
Higher property purchase costs could weigh on the property market and hit house price growth
House price crash illustration
The debate on the direction of house prices is divided
By Marc Shoffman, The Week UK
House price growth has slowed in recent months as the property market adapts to lower stamp duty thresholds, raising fears of a crash.
It was a "busy start to the year" for the housing market, said MoneyWeek, as demand rose among buyers who were racing to beat the March deadline when stamp duty thresholds were cut.
Since 1 April, first-time buyers pay stamp duty on homes worth more than £300,000, down from £425,000 previously, while home movers have seen their tax-free threshold drop from £250,000 to £125,000.
The outlook is "uncertain now that property purchase costs are higher", said MoneyWeek, while Donald Trump's trade tariffs could also hit confidence.
The latest Halifax House Price Index shows prices rose by 2.8% annually in March, which is flat on February, while they fell 0.5% on a monthly basis.
Meanwhile, Nationwide data for March showed annual price growth was also flat at 3.9% in the build-up to the stamp duty deadline.
House price predictions for this year vary between a slowdown and a slump as the market adapts to higher stamp duty costs, while some are still predicting inflation-beating growth. Some suggest prices are already dropping.
What's happened?
Property prices may not have crashed "on the surface", said The Telegraph. But the housing market has not recorded real price growth – "when adjusted for inflation" – since 2022.
Average house prices in real terms have fallen by around £49,000 between the first three months of 2022 and the final quarter of 2024, a drop of 15.6%, which is "favouring buyers" as sellers are losing "bargaining power" from higher stamp duty and increased supply.
Some regions are already being hit and uncertainty from Trump's tariffs and "stock market mayhem", said London's The Standard, is "set to plague London's beleaguered housing market again this year leading to short-term price falls".
Despite interest rate cuts in February, the number of buyers enquiring about properties via Rightmove in London was down 4% and dropped by 1% in March.
Could history repeat itself?
Even before winning the general election, the Labour Party was "clear" that it wanted to make homes more affordable, said The Telegraph.
For homeowners and anyone who has "mortgaged themselves to the hilt to meet record house prices", this is "at odds with house price growth".
But while stamp duty changes "could knock market confidence", said the HomeOwners Alliance, "it is more likely" that interest rate cuts and falling mortgage rates will help support buyer demand as well as the "anticipation of more property transactions in 2025".
What will happen to house prices?
Despite higher property purchase costs, the consensus among experts is that house prices will still rise this year, said Which?, "with predictions far more bullish than a year ago".
The "best estimate", said Savills, if interest rates fall further – bringing down mortgage pricing – is average UK growth of 4%. But it is predicting a 4% drop in prime central London locations, due to higher taxes and changing non-dom rules.
Rival estate agent Knight Frank is less bullish nationally, predicting a rise in house prices of 2.5% this year, as it is unclear if the chancellor's autumn Budget, which included changes to stamp duty and employer's National Insurance contributions, "will work and therefore by how much rates could fluctuate in the years ahead".
Similarly, Zoopla predicts that house price growth is "set to moderate" this year "as supply grows and the extra costs of stamp duty in England feed through into property values".
The property website is also predicting average price growth of 2.5% for 2025, but warned that sellers "need to be careful in how they set their asking price to attract sufficient demand to agree a sale".
theweek.com