House prices are flatlining as Stamp Duty is hiked for buyers at bottom of the ladder - and wealthy owners at top are under attack Out-of-touch Labour has turned April showers into financial storms. An awful, painful month awaits us. Awful Labour. But this high-taxing Government isn’t finished with wielding its wrecking ball (apologies if I’m about to spoil your Wednesday). Not content with imposing higher tax bills on struggling pensioners – allowing councils and water companies to jack up prices to pay for management greed – and hitting businesses with higher National Insurance costs, Labour now seems intent on knocking down the last of our household cards still standing. That is our proverbial financial castle, the home we own and live in – and for most represents by far our biggest asset. Yes, dear readers, this Government is in real danger of jeopardising the value of our homes through its distaste for the rich, its craving for ever more tax revenues to bail out the broken public finances, and its defenestration of the UK economy. The housing market is now at a crossroads. As one mortgage expert told me yesterday, it’s at a ‘crucial pivot point’ – prices could keep drifting upwards, or they might correct. We just don’t know. If they do correct, it would be good news for the tens of thousands of first-time buyers struggling to get a foot on the housing ladder. But, of course, it would be dreadful news for sellers and the millions of us who see our homes as the linchpin of our finances. It would also shake the foundations of the economy to its very core, shattering our already battered financial confidence in the process. Of course, a stiff correction is more possible than probable. Data released in the past 48 hours confirms the market’s delicate state, however. On Monday, the Bank of England said mortgage approvals dipped in February to their lowest level since August last year. This was despite a 0.25 per cent cut in interest rates to 4.5 per cent and a subsequent reduction in mortgage costs by banks and building societies. Rate cuts are normally great news for the housing market as they embolden both would-be buyers and wannabe house-movers. Not this time around. Indeed, financial consultancy Pantheon Macroeconomics warns that monthly mortgage approvals could fall further – to 61,000 – in the months ahead as the housing market remains subdued. To put this figure into some form of context, February’s approvals totalled 65,481. Then, yesterday, building society Nationwide released its latest house price data. Subdued seemed to be the tone of the supporting commentary, although the reaction of other housing commentators was more angst-ridden. Month on month, Nationwide says prices didn’t shift an iota in March, while annual price inflation ticked along at 3.9 per cent – the same rate as in February. The average did hide big regional differences, with Northern Ireland recording the strongest annual price growth (13.5 per cent) – and northern England showing heftier price rises than in the south. Catch-up time. Robert Gardner, the society’s chief economist, says the housing market will ‘remain a little soft’ in the coming months – but optimistically believes that activity will pick up steadily as we head towards summer. Mr Gardner’s view is that the underlying conditions for potential home buyers are ‘supportive’ – namely inflation-busting increases in earnings (just short of 6 per cent per annum, compared to inflation of 2.8 per cent) and the expectation of lower mortgage rates as the Bank of England continues to chip away at interest rates. Yet these conditions are far from guaranteed. It’s still too early to assess the impact of Labour’s National Insurance changes on businesses and their need to cut costs (reducing head counts, for instance) to mitigate the tax hike. Rising unemployment levels are never good news for the housing market. The UK’s economy could also face terrible headwinds if US President Donald Trump’s tariffs on imports into the US spark a global trade war and push up inflation here, forcing the Bank of England to hold back on interest rate cuts. It’s not surprising to learn that some financial commentators are not as sanguine as Mr Gardner. They point to a number of negatives that could put a real dampener on house prices. These negatives are occurring at both the top end and lower reaches of the housing market. At the bottom, many first-time buyers are now being hit with steep stamp duty bills and major affordability problems – while receiving little support from the Government, other than a malfunctioning Lifetime Individual Savings Account (Lisa), to help them on to the housing ladder. At the high end of the market, cruel non-dom tax rules have driven many buyers overseas, causing sharp falls in house prices. The concern is that these negative forces could start rippling through the whole market, undermining confidence and causing prices to fall across the board. My colleague Mark Palmer reports below on the already depressed housing market in parts of central London, triggered primarily by the abolition of the non-dom tax regime. Upmarket property firm Savills says the £4.6 million price of the average property in ‘prime central London’ is now more than a fifth lower than at the peak in June 2014 – a ‘saving’ of £1.2 million for wannabe buyers. For those with loads of money, it’s an opportunity to purchase a ‘plush’ property at a massive discount – but it’s also a sign of the unintended harm that government tax policy has caused the housing market. Yet it’s the impact of higher stamp duty bills that took effect yesterday which are likely to have a far wider impact on the housing market – and drive down prices. These larger tax bills follow Labour’s decision not to extend the lifting of the Stamp Duty thresholds the Conservatives introduced back in 2022 to support the housing market. It’s a move that will hit first-time buyers hardest, but also all house-movers looking to either upsize or downsize. The financial impact of Labour’s move cannot be underestimated. For example, a first-time buyer purchasing a £400,000 home prior to yesterday did not have to pay stamp duty because of a £425,000 nil-rate threshold (this was for England and Northern Ireland; different tax regimes apply in Scotland and Wales). But today, because of Labour’s refusal to extend this more benign stamp duty regime, that same purchaser will be hit with a £5,000 stamp duty bill, paying 5 per cent tax on the £100,000 property value above the reduced £300,000 first-time buyer nil-rate band. For a non-first-time buyer acquiring a similarly priced property, their stamp duty bill will jump from £7,500 to £10,000. Stamp duty is a rapacious tax – and an impediment to a thriving housing market. It prevents people moving to both smaller and larger homes. In the financial year ending April 2024, it raised £11.6 billion for the public finances. In the years ahead, it will raise a hell of a lot more. Greedy Labour. ‘Homebuyers are likely to weigh up the cost of homeownership very carefully from now on,’ warns Alice Haine, personal finance analyst at wealth manager Evelyn Partners. Not just because of higher stamp duty costs, she says, but the scary economic and financial backdrop. She’s bang on the nail. David Hollingworth, of L&C Mortgages, agrees. He says the hike in stamp duty bills now presents a ‘big challenge’ for homebuyers, particularly first-timers. For many in this bracket, he says the ‘desire to own a home remains strong, but mortgage affordability often struggles to match high house prices’. He adds: ‘These buyers are faced with a mountainous challenge in saving for a big deposit. Ramping up stamp duty costs for them doesn’t make sense.’ Affordability certainly remains a big problem. Nationwide’s Mr Gardner says that, currently, first-time buyers are typically absorbing 35 per cent of their take-home pay in mortgage payments (for London, it is 58 per cent). This, he says, compares with a long-term average of 30 per cent. ‘Affordability is stretched,’ Mr Gardner adds. The same conclusion is drawn when the average price that a first-time buyer pays for a home is compared to their annual earnings. The ratio today stands at five – ‘not super elevated’, says Mr Gardner, but not far off the 5.4 figure ahead of the financial crisis in 2008. I hear alarm bells ringing in the background. According to property website Zoopla, the housing market is currently awash with homeowners looking to sell – 11 per cent up on this time last year. The simple law of economics means that when supply of a product booms and demand is somewhat depressed, prices fall. Maybe, as Nationwide says, the market will become just a ‘little soft’. But I wouldn’t bank on it – and nor, for that matter, would my old university economics tutor Professor Llewellyn. I think house prices are heading south. How far, I don’t know. But if I were a buyer in the coming months, I would be negotiating down any asking price like crazy. As for selling, I’d only do so if needs must. As Ms Haine says, it looks like we’re entering a buyers’ market. This time, it’s seller – not buyer – beware. jeff.prestridge@dailymail.co.uk How London lost its lustre: Estate agents say exit of millionaires has left prices of luxury properties ‘same as in 2006’ By MARK PALMER Estate agents are well versed in talking up the market. Even when the figures tell a sorry story, they come up with a rosy explanation. Falling prices are a ‘wonderful opportunity’ – that sort of thing. But right now, when it comes to the so-called prime and super-prime markets in London, those same estate agents are struggling to put a positive spin on what they’re witnessing, and there’s not a lot of optimism about the future. In the world of real estate, ‘prime’ properties are generally the most desirable and aspirational, typically within the top 5 per cent of the market by value, while ‘super prime’ represents the very best available, often the top 1 per cent. In London, chi-chi districts such as Belgravia, Knightsbridge and Mayfair qualify as super-prime, while Notting Hill, Islington and Shoreditch are prime. But all is not well in the drawing rooms of the mega-rich, as high-end housing stock has been plummeting in value for years. ‘London has never been cheaper,’ says Trevor Abrahamsohn, managing director of Glentree International, which operates at the top of the market. ‘Prices in some magnificent parts of the capital are effectively the same as they were in 2006.’ This sentiment is echoed by the latest edition of Coutts London Prime Property Index, which reports that ‘Prime property in some central London postcodes is selling at very low prices compared to historic levels’. In Belgravia’s Lyall Street, for example, a property has dropped from £23.5million to £21million. In nearby Eaton Place another has been cut from £12million to £7million, and in Golders Green a home overlooking Hampstead Golf Club was reduced from £14million to £10million. All this is great news for those hoping to spend a few million to live in the capital – but it’s bad news for investors hoping to turn a quick profit and fairly disastrous for people selling now, when the impact of the Government’s fiscal strategy is sending shivers through the British economy. It can even affect ordinary Londoners. As wealthy buyers find themselves in the enviable position of being able to trade up from, say, Fulham to the glitzier environs of Chelsea, owners in less fashionable postcodes can find the value of their homes stagnating or, worse, falling. So has London lost its lustre? Have the tax rises and anti-growth policies from Chancellor Rachel Reeves put off buyers? If the super-wealthy want to identify the political villain who set the market off on its slippery slope, they need look no further than the former Tory chancellor, George Osborne. In his austerity budget of 2014, he announced a swingeing increase in stamp duty – the tax paid to the Exchequer when a buyer acquires a property. High-end buyers would henceforth pay 12 per cent for any home costing over £1.5million. And following Ms Reeves’s budget in October, from yesterday, second-home buyers will pay 17 per cent in stamp duty on properties that cost more than £1.5million. That means anyone buying a house or flat in prime central London for, say, £10million will need to find an additional £1.7million to cover the tax. That, clearly, is a deterrent. Another factor is the crackdown on the 200-year-old ‘non-dom’ system, which allows individuals whose permanent home, or domicile, is considered to be outside the UK to avoid paying tax on their overseas income. Former Tory Chancellor Jeremy Hunt began the process a year ago by passing legislation that meant new arrivals to the UK will pay the same taxes as other residents after four years. The Labour government is going a step further by abolishing non-dom status altogether and replacing it with a system which will bring foreign earnings into the UK inheritance tax system. This has already contributed to a widely reported exodus of high net worth individuals. More than 10,000 millionaires left the UK in 2024, according to reports, a 157 per cent increase on the previous year – triggered in large part by Labour’s plans. Now we can see the results. Many prime and super-prime properties in London stand empty, waiting forlornly for a buyer while their prices drop, month by month. ‘There’s been a perfect storm,’ says Paul Finch, from the agency Beauchamp Estates. ‘When you factor in the nom-dom situation; taxes being all over the place; a basket case of a government both before and after the election; world-wide uncertainty – yes, it’s very tough. Nothing in the super-prime market is selling above 2014 levels. We’ve had stagnation for ten years and, in real terms, once you take in inflation, the drop in prices at the top end of the London market has been huge.’ Agent Knight Frank explains that, in London, in 2014, £1million bought you 23 sq metres. Today it’ll buy you 34 sq metres – an ‘improvement’ for buyers of 43 per cent. In Dubai, Miami, Lisbon, Los Angeles, Shanghai, Berlin and Tokyo, you got far less for your money. However, London’s desirability as a global city is collapsing. ‘Stamp duty is the main driver for this,’ says Liam Bailey, editor of Knight Frank’s Wealth Report. ‘It would make a big difference if it came down. People aren’t moving like they should be and the loss of revenue from other services associated with buying and selling outweighs what the treasury will get in from the tax.’ Silver linings might be thin on the ground but agents agree that Americans are increasingly taking advantage of the cheaper prices. It’s been suggested that one of the reasons for this is a disillusionment with President Trump’s behaviour since taking office, a phenomenon that has been dubbed the ‘Donald Dash’. Home Office figures show American applications for UK citizenship have recently soared, rising 40 per cent year on year. More than 6,100 US citizens applied last year, the most since records began two decades ago and 26 per cent more than in 2023. Celebrities including Ellen DeGeneres and her wife Portia de Rossi, designer Tom Ford and Hollywood couple Ryan Gosling and his wife Eva Mendes are among those who have fled to the UK. It’s not the end of the world for a super-prime homebuyer if they find themselves outbid by those escaping Mr Trump, however. Mr Finch says anyone with a budget of £10million to £20million to buy a property can afford to wait. ‘These kinds of houses are discretionary purchases,’ he adds. ‘They don’t actually need them.’