London house prices plummet by £7k on average as buyers brace for Reeves's ‘mansion tax’
New figures from the Office for National Statistics (ONS) show the average London home lost £7,000 in value in September
London house prices dropped for the second month in a row in September, with the capital bracing for potential tax changes in Rachel Reeves’s upcoming Budget.
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New figures from the Office for National Statistics (ONS) show the average home lost £7,000 in value, falling to £556,000. London was also the only region in the UK to record an annual decline, with prices down 1.8 per cent.
Experts say speculation over a possible mansion tax has rattled the market for months. September’s 1 per cent monthly fall was the biggest drop since November 2023 and one of the sharpest since the pandemic.
Separate data from property analysts LonRes shows sales of homes worth £5 million or more plunged by 65 per cent last month.
The speculation of measures affecting property in the Budget is appearing to dampen prices, but Sir Keir Starmer refused to confirm or deny any such measures will be included on November 26.
Read More: Today's inflation win can't hide the trouble ahead for Rachel Reeves
Sir Keir was asked about Budget measures on Wednesday at Prime Minister's Questions by Kemi Badenoch, but refused to be drawn on the contents of next week’s announcements.
He said: “The Budget is actually next week, but I can tell her it will be a Labour Budget with Labour values, that means we will focus on cutting NHS waiting lists, cutting debt and cutting the cost of living.”
“This is the first Budget to unravel before it’s even delivered,” Mrs Badenoch said.
Nearly 500,000 in London and the South East face being dragged into paying the higher rate of income tax if the Chancellor extends the six-year freeze on thresholds by a further two years to 2029/30.
It is widely expected that a so-called mansion tax will be introduced in the Budget.
Hitting London and the South East hardest, it is believed the tax could be imposted on homes worth more than £2m, potentially with a one per cent levy on the value above this level of the properties.
It would leave owners of properties worth £2.5 million having to pay an extra £5,000 a year in tax, or just over £400 monthly, while a £3 million home would owe HMRC around £10,000 annually, or close to £800 a month.
Some reports suggest that Ms Reeves may even target properties worth over £1.5 million, which would mean tens of thousands more homes in London being caught by her latest tax grab.
Other Budget measures could include a more hefty bank levy, restrictions on pension salary sacrifice schemes, a new road levy for electric vehicles, and limits on a salary sacrifice scheme for cyclists to buy bikes.