UK House Prices Dip as Tax Uncertainty Cools Market, Rebound Forecast for 2026
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The UK housing market experienced a slowdown in late 2025, with asking prices falling below year-end levels for the first time in recent memory, fueled by anxieties surrounding potential property tax increases. The average price of a property coming to market in the four weeks to December 6 was £358,138, a 0.6 percent – or £2,059 – decrease compared to the same period in 2024, according to data released Monday by Rightmove.
Budget Uncertainty Dampens Demand
This decline marks a significant shift from the previous year, when average asking prices concluded 2023 £5,000 higher. The market experienced a more pronounced dip between November and December, with asking prices falling 1.8 percent – exceeding the typical December decrease, which averages 1.4 percent over the past decade.
The uncertainty stemmed largely from speculation surrounding changes to property taxation, which began circulating as early as August. These concerns culminated in Chancellor Rachel Reeves’ Budget on November 26, which introduced a “mansion tax” surcharge on properties valued above £2 million, alongside a 2 percentage point increase in property income tax rates.
“The weeks of speculation leading up to the autumn Budget certainly cooled the property market, especially for those making discretionary moves,” noted a senior official at property consultancy Strutt & Parker.
Supply and Demand Both See Declines
The impact of this uncertainty extended beyond pricing. The number of new sellers entering the market in the latter half of 2025 was 4 percent lower than in the same period of 2024, reversing a 9 percent year-on-year increase seen in the first half of the year. Simultaneously, the number of prospective buyers contacting estate agents decreased by 6 percent in the second half of 2025, following a 3 percent rise in the first six months.
Larger, more expensive properties bore the brunt of the downturn. Four-bedroom detached houses and properties with five or more bedrooms experienced the largest month-on-month price decline, falling 2.4 percent to an average of £642,131 in December. Smaller properties, with two bedrooms or fewer, saw a more modest decrease of 1.4 percent.
The data is based on approximately 66,000 asking prices from properties listed by estate agents and advertised on the Rightmove portal.
Interest Rate Cuts and 2026 Rebound Anticipated
Despite the recent challenges, optimism is building for a market recovery in 2026. Financial markets are widely anticipating a cut in Bank of England interest rates by a quarter of a percentage point to 3.75 percent on Thursday, which would likely translate to lower mortgage rates.
“With market conditions supporting higher levels of activity, and a hopefully more certain economic environment, we forecast a better year for price growth in 2026, with a strong rebound in activity to kick-start the year,” said Colleen Babcock, a property expert at Rightmove. The company predicts new seller asking prices will rise by 2 percent over the course of the year, driven by improved buyer affordability and increased choice.
