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The latest data from the UK housing market shows that, despite concerns surrounding the new Budget and anticipated tax changes, property prices continue to edge upwards.
According to the Nationwide Building Society report published on 2 December, the average UK house price increased by 0.3% in November, reaching £272,998.
This rise was stronger than economists had expected and signals that the market remains resilient in the face of uncertainty around the government’s future fiscal strategy. The annual rate of growth stands at 1.8% — a slight moderation in momentum, but not a reversal.
In a broader context, this aligns with the stabilisation trend observed since mid-2025, when the market slowly began to recover from a period of elevated interest rates and reduced mortgage availability. While the current pace of growth is moderate, the direction remains positive.
The Impact of the Planned ‘Mansion Tax’: Limited but Loud in Public Debate
One of the most debated topics ahead of the Budget announcement was the government’s proposal for a surcharge on properties valued above £2 million — commonly dubbed the “mansion tax” or “high-value council tax surcharge”.
According to The Guardian, this measure will affect only a very small fraction of the market.
Nationwide’s report notes:
“The changes to property taxes announced in the budget are unlikely to have a significant impact on the housing market.”
What does this mean in numbers?
- Fewer than 1% of properties in England exceed the £2 million threshold.
- In London, the share is around 3%.
- Most UK homes will not be subject to the new tax.
Although the announcement has sparked intense discussion — particularly in relation to the London market — the real impact on pricing and buyer behaviour is expected to be marginal and mainly confined to the premium segment.
Why Are Prices Still Rising? Four Key Drivers
1. Interest Rates Have Stabilised
The Bank of England recently decided to hold the base rate at 4%.
This stability is feeding through to the mortgage market — lenders are more willing to issue loans, and rates have stopped climbing.
Stable interest rates are a key factor supporting demand for property.
2. Demand Continues to Outstrip Supply
Despite a cautious approach from some buyers, the number of available properties — especially family homes and larger flats — remains limited.
Nationwide’s analysts highlight that even moderate demand is enough to push prices upward in a low-supply environment.
3. Delayed Purchase Decisions Are Returning to the Market
Many prospective buyers postponed their decisions ahead of the Budget.
Now that the details are clearer, and the effect of the “mansion tax” appears minimal, these buyers are returning with greater confidence.
4. Strong Rental Market Supports Buyer Activity
The rental market remains tight, with rising rents prompting some tenants to consider buying.
Combined with gradually improving mortgage availability, this adds further upward pressure on prices.
What Does This Mean for Home Buyers in the UK?
1. The ‘Mansion Tax’ Will Not Affect the Majority
For those purchasing below £2 million — i.e., most buyers — the new tax changes have no practical impact.
This segment of the market is expected to remain stable.
2. Potential Improvements in Mortgage Affordability
If analysts’ forecasts materialise and interest rates start to fall in 2026, borrowing capacity may improve further, reducing mortgage costs.
The coming months could therefore serve as a preparation period for buyers.
3. Stability Favors First-Time Buyers
A stable environment with moderate price growth is particularly favourable for those entering the market for the first time — especially compared with recent periods of rapid rate hikes.
What Should Property Investors and Landlords Know?
1. The Premium Segment Remains Small — But Active
Investors targeting properties above £2 million may face higher running costs due to the new surcharge, but demand in the high-value segment is expected to remain intact.
This is a niche market with its own dynamics and limited influence on mainstream price levels.
2. Rental Demand Remains Strong
High rents and limited rental stock mean that buy-to-let investments can remain attractive — if tax implications, including higher income tax rates on rental income from April 2027, are carefully analysed.
3. Refinancing Opportunities May Increase
With interest rate cuts anticipated in 2026–2027, some landlords may soon access more favourable mortgage products.
Monitoring offers and maintaining up-to-date financial documentation will be key.
Ready to make informed decisions? Speak to J. Dauman & Co.
If the 2026 Budget leaves you with questions about your tax position, buying power or investment plans, our specialists are here to guide you.
We offer clear, practical advice tailored to your circumstances — whether you’re purchasing your first home or managing a property portfolio.
Book a consultation with a J. Dauman & Co. adviser.
Source: The Guardian – https://www.theguardian.com/money/2025/dec/02/uk-house-prices-rise-budget-tax-fears-nationwide-november