UK Housing Slowdown: Stamp Duty Impact

Housing Activity Slips After Deadline Rush

Following a flurry of early 2025 transactions, the UK housing slowdown is linked to the stamp duty relief expiry. According to the latest findings from the Royal Institution of Chartered Surveyors (RICS), the momentum that had built up earlier in the year lost traction toward the end of March, as potential buyers and sellers adjusted to a new fiscal reality.

The stamp duty holiday encouraged many to bring forward their property purchases. This was especially true for first-time buyers and upsizers. With the more generous tax thresholds now reduced, estate agents and chartered surveyors are reporting a marked decline in both market activity and buyer enthusiasm.

Price Growth Tapers Across Most Regions: UK Housing Slowdown

According to data collected by RICS members, house price growth has softened notably across the UK. In March, only a net balance of 2% of surveyors reported price increases – significantly lower than February’s figure of 11% and January’s of 20%. This suggests a broader market stabilisation, with less upward pressure on pricing.

While most regions reflect this trend of subdued price growth, Scotland and Northern Ireland stand out as relative exceptions. These areas have shown greater resistance to downward trends, potentially due to differences in regional affordability, buyer sentiment, or the structure of local housing markets.

In contrast, England and Wales are experiencing more pronounced stagnation. This is especially true in areas where house prices surged during the pandemic-driven housing boom. This normalisation may represent a long-overdue correction after years of rapid increases, which had outpaced wage growth and stretched affordability.

Stamp Duty Changes: UK Housing Slowdown

The recent changes to stamp duty thresholds have had a direct influence on market dynamics. As of 1st April, the nil-rate threshold for first-time buyers was reduced from £425,000 to £300,000. For other residential purchases, the threshold where stamp duty kicks in fell from £250,000 to £125,000. These reductions have effectively increased the tax burden for a wide range of buyers, leading to hesitancy and, in some cases, postponed transactions.

Stamp duty applies only to properties purchased in England and Northern Ireland, meaning buyers in Scotland and Wales are subject to different systems of property taxation. Changing government incentives influenced buyer behaviour nationwide. Consequently, activity surged before the deadline but dropped sharply afterwards.

Demand from Buyers Drops to Lowest Level in Months

The RICS report highlights a significant drop in interest from new buyers. In March, a net balance of 32% of surveyors reported a decline in buyer enquiries, compared to 16% in the previous month. This is the sharpest fall in demand since September 2023, indicating that confidence may be waning among prospective homeowners.

Economic uncertainty, rising interest rates, and the recalibration of stamp duty liabilities are all likely contributing factors. Furthermore, concerns about future affordability, especially in light of high inflation and stagnant wage growth, may be causing would-be buyers to adopt a wait-and-see approach.

Sales Activity Sluggish but Outlook Cautiously Optimistic

Transaction volumes also appear to be under pressure. A net balance of 16% of property professionals reported a fall in agreed sales during March. Despite this dip, sentiment regarding the year ahead remains cautiously optimistic. Around 11% of respondents to the RICS survey expect sales to rise in the next twelve months. This suggests some professionals view the current slowdown as temporary.

Market analysts acknowledge short-term challenges may persist. Nevertheless, strong demand from young buyers and upsizers could support recovery later. However, the pace of that recovery is likely to depend on broader economic developments, including the trajectory of inflation and interest rates.

Rental Market Tells a Different Story

While the owner-occupier market appears to be cooling, the rental sector is showing signs of renewed strength. March marked the first month since October 2024 in which tenant demand was reported to have increased. Letting agents are seeing more interest from individuals and families unable or unwilling to buy, either due to affordability issues or a lack of suitable properties on the market.

At the same time, new rental listings remain sparse. Landlords are continuing to scale back their portfolios or exit the market altogether, often citing increased regulatory pressures, higher mortgage costs, and reduced profitability. The result is a widening gap between supply and demand, which is pushing rents higher.

RICS reports that a net balance of 31% of surveyors anticipate further rent increases over the next three months. For tenants, this could mean more financial strain, particularly in urban centres where rental competition is already fierce.

External Economic Forces Add Further Pressure: UK Housing Slowdown

Adding to the complexity is the potential impact of geopolitical developments – most notably, the possibility of US tariffs affecting the broader UK economy. Although not directly linked to housing, such measures can cause instability. This, in turn, may erode consumer confidence and affect spending.

If tariffs increase import costs or spark retaliation, inflation could rise again. As a result, interest rates may climb. Such a scenario would further dampen mortgage affordability and reduce the pool of eligible buyers, compounding existing challenges in the property market.

Market in Transition: Temporary Pause or Structural Shift?

As of now, the UK housing market appears to be in a transitional phase. The expiry of government incentives has exposed underlying fragilities – particularly around affordability and supply shortages. While there remains a solid base of underlying demand, the barriers to entry for many are becoming more pronounced.

RICS’s latest assessment suggests that the coming months will be a crucial period for gauging the direction of the market. If inflation eases and mortgage rates begin to stabilise, a modest rebound in activity is possible. However, if broader economic conditions remain volatile, both the sales and lettings markets may continue to diverge, with buyers retreating and renters feeling the squeeze.

Conclusion: A Market in Need of Rebalancing

In summary, the post-stamp duty holiday period has ushered in a quieter phase for the UK housing market. With demand cooling, price growth levelling off, and sales slowing, the property sector appears to be recalibrating after a period of intense activity and artificial stimulus.

Meanwhile, the rental market faces a different kind of pressure – buoyant demand amid dwindling supply, leading to concerns about affordability and access. Fiscal policy and monetary measures will play a key role. Additionally, external economic shocks may shape housing in coming months.

For now, uncertainty prevails, and both buyers and sellers may find themselves in a holding pattern, waiting for greater clarity before making their next move.