Tax changes announced by Rachel Reeves are expected to transform the property market (Picture: Getty Images)
Following the unveiling of the Autumn Budget by Chancellor Rachel Reeves, the Office for Budget Responsibility (OBR) has predicted the average property price.
The typical UK home is forecast to increase in value from an average price of £271,531 to just under £305,000 by 2030.
This represents an annual growth rate of around 2.5% from 2026 onwards, broadly in line with average nominal earnings growth.
But despite this positive trajectory for prices, the OBR has revised down other aspects of the housing market, including property transactions and new home construction.
Property sales are anticipated to climb from just under 1.1 million in 2024 to approximately 1.3 million in 2029. This is more than 150,000 fewer sales per year than forecast earlier this year.
New housing supply estimates for 2029/30 have also been trimmed by approximately 10,000 units compared to projections made in March.
Impact of new government tax measures
This more subdued outlook has partly been attributed to recently announced government tax policies designed to increase revenues from the housing sector.
Chancellor Rachel Reeves unveiled two significant tax changes in the Autumn Budget:
- From April 2027, rental income for landlords will be taxed at rates two percentage points higher than standard income tax rates, raising the basic rate to 22%, the higher rate to 42%, and the additional rate to 47%.
- Starting in 2028, a new annual council tax surcharge will apply to homes valued over £2 million. This tax has four bands, starting at £2,500 for properties valued between £2 million and £2.5 million, increasing to £7,500 for homes over £5 million.
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Previous Page Next PageFewer than 1% of properties in England are expected to be impacted by this high-value home tax threshold, but housing experts warn that these measures could dampen market activity more broadly.
Colleen Babcock, a property expert at Rightmove, told the Daily Mail: ‘A mansion tax could lead to some distortion at the top end of the market, particularly as the implementation date draws closer.
‘While this likely very complex tax aims to target the £2 million and £5 million price sectors, there is an inevitable trickle-down effect for the rest of the market.
‘A slower market can affect all types of movers, from first-time buyers to key workers and families.’
These recent tax hikes build on measures announced last year, including a 2% stamp duty surcharge on buy-to-let and second home purchases.
This has significantly increased transaction costs for investors and second-home buyers.
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For instance, the stamp duty bill on a £500,000 second home can now reach around £40,000, compared with approximately £27,500 previously.
And council tax premiums on second homes have doubled in many local authorities, meaning a second home owner in England paying the typical Band D council tax of £2,171 is now paying £4,342.
Industry commentators warn that the combination of higher purchase costs, increased taxation on rental income, and forthcoming council tax charges could transform expensive homes from lucrative assets into financial burdens.
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This shift is thought to contribute to the OBR’s more cautious forecast on housing market activity.
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