UK annual house price growth weakened in August as affordability and tax concerns continue to weigh on buyers, new data from Nationwide shows.
The price of an average home slipped by 0.1% between July and August from £272,664 to £271,079. The annual rate of price growth also slowed down, with prices up 2.1%compared to the same month last year, compared to 2.4% in July.
Notably, Nationwide’s data shows that 53% of owner-occupied properties in England are classified as ‘underoccupied’, meaning they have two or more spare bedrooms.
The drop comes after reports that Chancellor Rachel Reeves was preparing new measures targeting homeowners, including a proposed mansion tax on property sales.
Reports also suggested she was weighing the possibility of scrapping private residence relief—which currently exempts primary homes from capital gains tax—for properties valued above a certain threshold.
“The relatively subdued pace of house price growth is perhaps understandable, given that affordability remains stretched relative to long-term norms,” said Robert Gardner (Chief Economist at Nationwide).
“House prices are still high compared to household incomes, making raising a deposit challenging for prospective buyers, especially given the intense cost of living pressures in recent years.”
However, affordability should continue to improve gradually if income growth continues to outpace house price growth as we expect, Gardner said.
“Borrowing costs are likely to moderate a little further if the bank rate is lowered again in the coming quarters. This should support buyer demand, especially since household balance sheets are strong and labour market conditions are expected to remain solid.”
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