UK’s £2 million-plus homes risk losing 5% in value next year
The housing market has endured disruption, partly caused by hikes to stamp duty
[LONDON] UK homes worth more than £2 million (S$3.5 million) could drop about 5 per cent in value next year as the market adjusts to a so-called mansion tax, according to forecasts from Hamptons.
The broker said that it expected these homes, most of which are in London, to see a “one-off adjustment” in 2026 based on price reductions that factor in a new levy coming into force in April 2028. Chancellor of the Exchequer Rachel Reeves last month unveiled a tax on homes valued at more than £2 million, with a surcharge starting at £2,500 a year and rising to as much as £7,500.
A 5 per cent price correction would be the largest annual drop in values since 2009 for homes that have maintained a value of more than £2 million during those years, according to Hamptons’ data. The broker said that it expected London to be the only region in Britain to see house prices fall in 2025, predicting a 0.5 per cent decline in the year compared to growth of as much as 5 per cent in other regions.
“It’s hard to ignore the growing drag of taxation and politics,” Aneisha Beveridge, head of research at Hamptons said in a report. London “is being held back by higher stamp duty and broader tax anxieties, locking some owners into their homes and others out of buying them”.
The housing market has endured disruption partly caused by hikes to stamp duty and the abolition of a system that allowed wealthy foreigners, or so-called non-doms, to avoid UK taxes on their overseas earnings. The changes have disproportionately impacted activity in London, where the market has also been affected by fiscal worries, as Labour raises revenue to pay for higher public spending.
The new mansion tax targets less than 1 per cent of all properties in England. However, most homes worth more than £2 million are in London, where property agents are warning the tax could amplify turbulence in the city’s market.
London’s already weak house price growth is set to significantly trail the rest of Britain for at least the next two years. Hamptons predicts London will be the only region to not see house prices rise next year, and says it will lag behind other UK regions in growth by as much as roughly 16 percentage points between 2024 and 2028.
The broker expects house prices to rise by 2.5 per cent across Britain in 2026, followed by 2 per cent growth in 2027 and a further 1.5 per cent in 2028. It said political uncertainty will become a more prominent driver of property sentiment in 2028, the year before the next planned general election.
Based on market views on interest rates, the base rate could move further downwards next year and “settle” at about 3.25 per cent at the end of 2026, Hamptons said. This should increase Britons’ chances of securing mortgage deals below 4 per cent, it added.
“Inflation is easing, mortgage rates are falling, and affordability is improving,” Hamptons’ Beveridge said. “At the same time, the balance of power is shifting: the Midlands is forecast to have seen more price growth than London since prices bottomed out after the 2008 financial crash.” BLOOMBERG
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