London housing market suffers from stamp duty hangover as demand drops

The London housing market is currently facing a significant decline in buyer demand, a situation described as a "stamp duty hangover." According to Zoopla, the buyer demand has fallen by 3% over the past year, contrasting with the steady demand seen elsewhere in the UK. This decline has been notably impactful among first-time buyers, who are hardest hit by the upcoming changes in stamp duty regulations. Starting in April 2025, the nil-rate threshold for first-time buyers will decrease from £425,000 to £300,000, meaning a substantial number of first-time buyers are expected to pay stamp duty for the first time after the threshold change. Consequently, Zoopla estimates that 80% of first-time buyers in London will face stamp duty costs under the new rules, in stark contrast to the current situation where less than half are affected by the taxes. In the lead-up to these changes, many first-time buyers expedited their purchasing decisions last year to avoid the financial burden of increased stamp duty, which has resulted in a decreased demand as the deadline approaches, contributing to a slowdown in housing market activity. Overall, Zoopla notes that the annual rate of UK house price growth has slowed, dropping from 1.9% in January to 1.8% in February, driven by an increase in supply and the influence of the anticipated stamp duty changes on house prices. The timing of these shifts indicates that the capital's housing market is grappling with the aftereffects of a frenetic period in late 2024 when buyers sought to make their purchases before the deadline. This has confused the usual dynamics in London, where previously the market exhibited resilience in comparison to other areas across the UK. With the market currently easing, Zoopla emphasizes that households looking to sell may need to carefully consider their pricing strategies in response to the changing environment to attract potential buyers effectively.