What the 2025 Budget Means for the UK Property Market

The recent Autumn Budget 2025, delivered on 26 November, has triggered a range of reactions across the property sector – from buyers and sellers, to landlords, investors and developers. With some measures kicking in immediately and others delayed by a few years, the overall message is: modest change, but enough to make many pause and rethink their plans.

 Key changes from the Budget

• A new annual surcharge on high-value homes: from April 2028, properties in England valued at £2 million or more will attract a new levy,  commonly dubbed the “mansion tax”. Charges will range between £2,500 and £7,500 per year, depending on the value band.
• No changes to Stamp Duty Land Tax (SDLT) thresholds or rates, and no new incentives akin to previous “Help to Buy”-style schemes.
• Higher tax burden on rental income from private landlords – reflecting a continued shift in how the government approaches property wealth rather than just property transactions.On a positive note, if the Budget helps to bring down inflation as projected, this could lead to lower interest rates and, in turn, lower mortgage costs and an eventual tailwind for buyers.

What the others say

According to analysis by Knight Frank, the impact on the overall property market may be more modest than many expected. Their London teams reportedly exchanged around £90 million of property within 24 hours before the Budget, a sign that pent-up demand could be released now that uncertainty has passed. 

That said, Knight Frank notes the “mansion tax” will add a fresh layer of cost for high-value homeowners, and landlords face pressure from increased property-related taxation alongside existing regulatory burdens.

What does it mean for you:

First-time buyers / regular buyers	With no stamp duty changes and potential for lower mortgage rates in the near future, the Budget offers a stable backdrop. Now may be a good time to plan ahead, especially with uncertainty clearing.
Owners of high-value homes (2 m+ value)	Will face a new annual surcharge starting 2028, which will need to be budgeted for potentially influencing decisions about selling or downsizing.
Landlords / buy-to-let investors	Higher taxation on rental income may squeeze margins, and ongoing legislative and regulatory burdens could further discourage smaller landlords.
Property developers & investors	While there is no fresh stimulus via buyer-incentives, improved planning commitments and potential mortgage-rate reductions could help demand support new developments.

What this means for homesellers and homebuyers now

For most people, the Budget doesn’t dramatically change the financial landscape of buying or selling a regular home. The absence of changes to Stamp Duty helps preserve predictability; and if inflation falls and interest rates follow, mortgage costs could become more attractive.

That said, those with high-value properties need to factor in the new surcharge when thinking about holding onto their homes long term. Landlords, especially those with smaller portfolios  may reconsider whether buy-to-let remains viable under rising tax burdens.

For people thinking of selling, it may make sense to act before 2028 if you own a property that could reach the £2 million threshold though the surcharge affects only a small fraction of properties (less than 1%).

Crystal ball predictions:

Gradual recovery with modest price growth

Summary: Inflation starts to come down in 2025. From mid-2026 the Bank of England is expected to cut rates two or three times. Mortgage rates then fall slowly, making buying more manageable for first time buyers and people looking to move. Demand improves in most parts of the country, though London and the South East remain mixed because the high value surcharge is due in 2028.

Year by year

2025
Prices stay fairly steady, rising by about 1 to 2 percent. Lower inflation begins to influence mortgage costs, but lenders stay cautious. More sales go through as the uncertainty following the Budget fades.

2026
Rate cuts bring average mortgage rates down towards 4 percent. Buyers become more confident, particularly in northern England and Scotland. House prices rise by about 3 to 4 percent. Rental supply tightens further as some landlords leave the market, pushing rents up by 4 to 5 percent.

2027
A calmer mortgage market supports steady activity. Prices rise by around 3 percent. Some owners of higher value London homes choose to sell early ahead of the 2028 surcharge, leading to a small rise in listings but no sharp fall in prices. Regional markets continue to perform better than London.

Who is most affected

• First time buyers benefit from slightly better affordability.
• Home movers find it easier to secure a mortgage at a lower rate.
• Landlords come under more tax pressure, which keeps rents rising faster than wages.
  

  OR

   

  Stagnation followed by a mild fall in higher value areas

  Summary: Interest rates come down more slowly than hoped, inflation takes longer to ease and mortgage costs stay fairly high through most of 2026. The planned surcharge for two million pound homes puts buyers in parts of London and the South East off. Rents continue to rise as more landlords leave the market.

  Year by year

  2025
  House prices dip by about 1 percent across the country, with slightly larger drops in expensive areas. Fewer people buy or sell because homes remain hard to afford. Rents increase as rental supply falls.

  2026
  Mortgage rates fall only a little. Buyers stay cautious. Prices drop by another 1 to 2 percent, especially for homes worth more than 1.5 million pounds. Regional cities hold up better. Rents rise by about 5 to 6 percent.

  2027
  Most regions begin a slow recovery, but higher value areas soften as owners prepare for the 2028 surcharge. Prime London may see falls of 3 to 5 percent as more properties are listed early. National prices stay roughly the same. Rising rents become a serious concern.

  Who feels the impact

  • Owners of high value homes see weaker demand as the surcharge approaches
  • Landlords continue to face tight margins.
  • First time buyers gain a little negotiating power, but mortgage costs still make buying difficult.

  The 2025 Budget did not bring major changes for most of the UK housing market, but it does show a change in focus. The government is moving away from taxing property sales and towards taxing wealth and property ownership. For most buyers and homeowners, the longer term impact is likely to be small. For people with high value homes and for landlords, the new charges and higher tax load mean it may be sensible to review property plans sooner rather than later.