Soaring stamp duty costs are creating a 'north-south' divide in the property market, experts warn

EXPERTS have warned that new housing data shows a ‘north-south’ divide has been created in the property market.

Housing market activity has surged, with buyer demand up 11 per cent and agreed sales up eight per cent year-on-year, defying the typical summer slowdown, according to Zoopla’s latest House Price Index.

National house price inflation has slowed to 1.3 per cent, driven by a 12 per cent increase in homes for sale and higher stamp duty costs for many buyers.

Higher stamp duty costs now impact 83 per cent of homeowners and 41 per cent of first-time buyers (up from 19 per cent), with the impact on prices felt primarily in Southern regions such as London and the South-East.

The greatest impact is on those buying in London and higher value parts of the South East. Based on the average first-time buyer price in London the stamp duty cost is £6,100 compared to £0 before April.  

Northern England, Scotland and Wales are seeing faster price growth (two to three per cent), with Northern Ireland at 6.1 per cent. Southern England is seeing the weakest growth (below one per cent).

Truro, Torquay and Exeter are registering some of the biggest price falls outside of London, at -1.3 per cent, -1.2 per cent and -1.1 per cent respectively

Commenting on the report, Richard Donnell, Executive Director at Zoopla, said: “The housing market is broadly in balance. We're seeing healthy levels of demand and sales, but this isn't sparking faster price inflation. In fact, more homes for sale, particularly across southern England, is re-enforcing a buyer's market, keeping price rises in check. Many more home buyers are paying stamp duty since April and want this extra cost reflected in the price they pay. While mortgage rates are holding steady, less stringent affordability testing has  boosted buying power and is supporting more sales despite increased uncertainty." 

“At the start of the year, we predicted house prices would rise just two per cent, at the lower end of forecasts for house price inflation. Prices are on track to be one per cent higher over 2025, half the level forecast. Greater supply of homes for sale and mortgage rates remaining higher than expected are the key reasons for weaker growth. Low house price inflation is not a bad thing so long as there is enough market confidence for people to list their homes and make bids to buy homes.”

Financial experts reacted to the new research, saying stamp duty is having a huge effect.

Pete Mugleston, Managing Director at onlinemortgageadvisor.co.uk, said there is now a “dividing line” of stamp duty.

He said: “Looser lending conditions have boosted buying power, even with interest rates staying higher than expected. This has helped keep buyer interest strong nationwide. 

"The real dividing line now is stamp duty. It’s weighing heavily on buyers in London and the South, where property values are higher, while regions like Northern England, Scotland, Wales and Northern Ireland are seeing stronger growth thanks to a lighter tax burden.”

Dariusz Karpowicz, Director at Albion Financial Advice, agreed there was a north-south divide due to stamp duty.

He said: “There's a paradox in the property market at present, as surging activity levels meet stubborn price resistance. Recent lender moves to slash rates and bump up loan-to-income ratios have unleashed fresh buying power, while the flood of properties hitting the market gives purchasers serious negotiating clout. 

"Yet stamp duty reforms have created a brutal north-south divide, with buyers in pricier southern regions now facing hefty tax bills that weren't there before April. This tax burden is fundamentally reshaping market dynamics - while northern regions enjoy relatively modest stamp duty hits and stronger price growth, southern buyers are essentially demanding that sellers absorb these extra costs through lower asking prices.”

David Stirling, Director at Belfast-based Mint Mortgages & Protection, said competition for properties below the stamp duty threshold is fierce: "We are seeing the usual seasonal demand and the fact that statistics show that house prices in Northern Ireland are up 6.1% doesn't come as a surprise. House prices are slightly lower here, and demand is high due to relatively low stock levels. That's keeping prices moving up. For properties priced below the stamp duty thresholds, the competition is fierce.

“Generally, property transactions have moved quickly this year, however London looks to be the area slowing down most. Even with increased borrowing capabilities due to the loosening of affordability rules, property in London is almost inaccessible to those on lower incomes.”

Daniel Hobbs, CEO at New Leaf Distribution, added: “The property market has definitely felt the impact of the stamp duty deadline. Buyers who missed out on the savings are now trying to claw them back by making lower offers, and in the current market many sellers have no choice but to play ball. 

"More lenders loosening their affordability criteria and innovating has definitely helped keep demand fairly robust in what remains a challenging economy.”

Andrew Montlake, CEO at Coreco commented: “In our experience, the summer has been fairly busy, with lenders letting people borrow more a key driver of activity levels. 

"Given the headwinds facing the economy, it's certainly a buyers' market overall. Our advice to buyers remains the same: if you can afford to, get on the ladder while you can because history shows house prices only move in one way over the long term, and that's up.”