House prices in the UK slipped for the second month in a row, dropping 0.6% between August and September 2025 — a sharper decline than the 0.1% drop seen a year earlier. The average home now costs £272,000, according to the UK House Price Index, a government-backed measure that tracks monthly shifts. What’s more telling? London’s prices fell 1.1% in a single month, dragging its average down to £556,000. Meanwhile, buyers are vanishing. The Royal Institution of Chartered Surveyors (RICS) reported a net balance of -19% for new buyer inquiries in September — the lowest level since early 2023. The twist? It’s not just about affordability. It’s about policy, timing, and a generation of buyers who’ve lost faith in the market.
Where the Market Is Falling — and Where It’s Holding On
The data reveals stark regional divides. In the North East, prices rose 3.5% annually to £162,000, even as they dipped 1.2% month-to-month. Yorkshire and the Humber defied the trend with a 4.5% annual surge and even a slight 0.3% monthly gain. But in the South East and South West, where prices hit £384,000 and £307,000 respectively, the monthly drops were -1.2% and -0.9%. These are the areas where buyers once rushed — now they’re hesitating.The Office for Budget Responsibility (OBR) still expects long-term growth, forecasting prices to reach just under £305,000 by 2030. But the path there is bumpy. Growth in 2025 is now pegged at under 3%, down from earlier projections of 4%. And by 2026, it’s expected to slow further to 2% — a far cry from the boom years of 2021 and 2022.
Budget 2025 and the Mansion Tax That Changed Everything
The biggest shock came from Rachel Reeves, the Chancellor of the Exchequer. Her Budget 2025 unveiled a new mansion tax with four tiers: £2,500 for homes between £2 million and £2.5 million, rising to £7,500 for those valued at £5 million or more. It’s not just a revenue grab — it’s a signal. The message? The era of unchecked luxury property speculation is over.The OBR estimates this tax, combined with higher Stamp Duty and rising mortgage rates, will shave 0.1% off annual price growth starting in 2028. But the psychological impact? Far bigger. Sellers are holding off, hoping for better terms. Buyers are waiting, expecting further price drops. The result? Sales are taking longer. In September, the average time to complete a sale stretched to 14 weeks — up from 10 weeks a year ago.
Why First-Time Buyers Are Still Locked Out
Even with the Bank of England cutting interest rates in August 2025, the dream of homeownership feels further away than ever. Ninety percent of mortgages are now fixed-rate — meaning today’s borrowers are still paying the price of last year’s spikes. And while rates are falling, deposits aren’t. The average deposit needed for a first-time buyer remains at 18% of the property value — over £49,000 for a median-priced home.“It’s not that people don’t want to buy,” says a London estate agent who asked not to be named. “They can’t. They’re saving for years just to get a foot in the door — and then the market shifts under them.”
Meanwhile, housing completions are expected to drop sharply in Q4 2025. The RSM UK housing tracker now predicts only 215,000 new homes will be built in 2026–27 — down from 260,000 in the early 2020s. Builders are pausing. Lenders are tightening. And the public is losing patience.
The Economist’s Radical Fix: PILL and the Affordable Housing Authority
Enter Steve Keen, the economist whose YouTube video “Brutal Truth: UK Housing Market 2025” has gone viral among frustrated millennials. Keen argues the crisis isn’t about a lack of houses — it’s about reckless lending. “The price-to-income ratio has doubled since the 1970s,” he says. “It’s not scarcity. It’s credit.”His solution? Two bold ideas. First, PILL — Property Income Limited Leverage — which would cap mortgages at 10 times rental income, not 4.5 times salary. Second, an Affordable Housing Authority (AHA) offering zero-interest mortgages to median and below-median earners. “This isn’t socialism,” Keen insists. “It’s market correction.”
The Bank of England’s next move — another rate cut in 2026 — could give the market a short-term jolt. But inflation remains stubbornly at 2.8%, above target. And without structural reform, any rebound will be fragile.
What Comes Next?
The next six months will be critical. If housing completions continue to fall, local councils may be forced to fast-track planning approvals. If the mansion tax leads to a surge in sales from high-value owners looking to avoid future liabilities, we could see a temporary spike in luxury listings. But for most families? The path to ownership remains steep.One thing is clear: the UK housing market is no longer a guaranteed investment. It’s a policy experiment — and the results are still being written.
Frequently Asked Questions
How has the mansion tax affected high-end property sales?
Since the Budget 2025 announcement, inquiries for homes over £2 million have dropped by 32% in London and the Home Counties, according to private market data. Sellers are delaying listings, hoping for tax relief or price adjustments. A small number of ultra-high-net-worth buyers have accelerated purchases ahead of April 2027, when higher property income tax rates kick in — creating a temporary spike in luxury transactions, but no sustained market rebound.
Why are first-time buyers still struggling despite falling interest rates?
Although the Bank of England cut rates in August 2025, 90% of mortgages are fixed-rate, locking in higher payments from 2023–2024. Meanwhile, average deposits remain at £49,000 — up from £37,000 in 2020. Wage growth has averaged just 3.1% annually since 2022, far below the 8%+ price growth seen during the pandemic. For many, saving a deposit now takes over a decade — longer than it did in the 1990s.
What’s driving the regional price differences across the UK?
The North East and Yorkshire have seen stronger annual growth due to lower baseline prices and increased remote work adoption, making them attractive to buyers priced out of the South. Meanwhile, London and the South East are hit hardest by the mansion tax and higher mortgage costs, as many buyers there were already stretched thin. Migration patterns have also shifted — fewer people are moving to London for jobs, reducing demand.
Will house prices fall further in 2026?
Most analysts expect modest growth of 1–2% in 2026, not declines. But this isn’t a recovery — it’s stabilization. The OBR and RSM UK both warn that without a surge in housing supply or major affordability reforms, any gains will be fragile. The real risk? A “lost generation” of buyers who give up entirely, reducing long-term demand and leaving the market skewed toward investors and cash buyers.
How does Steve Keen’s PILL system work?
PILL caps mortgage lending at a multiple of a property’s rental income — not the borrower’s salary. For example, if a home rents for £1,200/month, the maximum mortgage would be based on 10x that annual income (£144,000), regardless of how much the buyer earns. This prevents speculative buying and ensures loans are tied to real income potential. It’s designed to make housing more affordable for renters transitioning to ownership, not just the wealthy.
What role does the ageing population play in the housing slowdown?
People over 65 now account for 18% of the UK population — up from 15% in 2015. They’re less likely to move, and when they do, they often downsize within the same region rather than sell to first-time buyers. This reduces housing turnover by an estimated 12–15% compared to a decade ago. The result? Fewer homes enter the market, even as demand from younger buyers grows — creating a mismatch that no amount of new builds can quickly fix.
Releted Post
DeMarcus Finley
I'm DeMarcus Finley, a sports enthusiast with a special passion for soccer. As an expert in the field, I enjoy sharing my knowledge and insights about the game with others. I've spent years studying and analyzing various aspects of soccer, from player stats to team dynamics. I love writing in-depth articles and engaging opinion pieces about the beautiful game. My goal is to inspire and educate soccer fans around the world with my unique perspective and expertise.
Comments
Post Comment