Market News

BY Maya Wilson-Autzen

Desperate home sellers are flooding the property market at “biblical” levels, causing house prices to plummet, experts have warned.

Home values fell unexpectedly at their fastest rate in two years, down by 0.8pc from £273,427 in May to £271,619 in June, according to the Nationwide house price index.

The figures defied analysts’ predictions of a 0.1pc increase.

Estate agents said a slump in demand after Rachel Reeves’s stamp duty raid is being met with an “almost biblical flood of supply”.

The stamp duty holiday ended in April, returning the threshold at which buyers start paying the levy to £125,000 from £250,000.

For first-time buyers in England, the threshold for not paying stamp duty was also reduced, from £425,000 to £300,000.

A second home premium also came into effect on April 1, doubling the council tax for thousands of families across England. It has sparked fears that many will be forced to sell up.

Experts warned that the life is being “sucked out of the housing market.”

Jonathan Hopper, of Garrington Property Finders, said: “The post-stamp duty lull in demand has collided with a deluge of supply.

“In some areas, the flood of supply seems almost biblical. Estate agents are seeing a wave of new instructions that includes properties re-entering the market that were withdrawn from sale during last year’s uncertainty, as well as the traditional summer surge.

“This is not primarily a market correction prompted by falling demand, but one triggered by an inescapable imbalance: too many sellers, not enough serious buyers.”

The number of new listings was 14pc higher in the first half of 2025 than the five-year average, Knight Frank data shows.

Tom Bill, head of residential research for the estate agency, said:  “It is a combination of a stock overhang from the stamp duty cliff edge, buyers re-activating plans put on hold last year due to the political upheavals, landlords selling due to red tape and holiday homes coming to the market due to the council tax changes.”

The Telegraph has heard from second home owners who are being forced to sell after receiving exorbitant council tax bills.

Diane and Ron Morphey have been “pressured” to put their Cornwall house on the market after struggling with the “significant financial burden”.

Jo Ashby, of John Bray Estate Agents in Cornwall, said that successive government policies, such as stamp duty changes and council tax premiums, meant “there are more second homes on the market than we’ve seen in a long time”.

Property website, Zoopla, previously found that council tax changes have had negative impacts on house prices in coastal and rural areas.

Paul Dales, chief UK economist of Capital Economics, said: “It’s clear that the rise in stamp duty on April 1, the recent falls in employment and slowing in income growth has sucked some life out of the housing market.”

Families are braced for more tax rises in the autumn after a series of Labour policy reversals, which are set to increase public spending by £4bn this year.

Mr Bill, of Knight Frank, said: “The bad news is that the Chancellor has zero financial headroom to play with, which means a re-run of 2024 and a game of ‘guess the tax rise’ ahead of the Budget.”

He said homeowners must recognise “the fact it is very much a buyers’ market”.

Despite Ms Reeves lowering the tax threshold for first-time buyers, the outlook is “a little brighter” for those hoping to get on the property ladder, with house prices to earnings ratio dipping (see graph above).

Nicholas Mendes, mortgage broker John Charcol, said: “We’ve seen a combination of falling house prices and a steady stream of mortgage rate reductions, which is undoubtedly helping to ease some of the pressure. Lenders are clearly competing for business at the moment, particularly with products aimed at buyers with smaller deposits, something that would have been much harder to come by just a year ago.

“On top of that, we’re starting to see some lenders slightly loosen affordability criteria or improve loan-to-income multiples, which can make a meaningful difference for buyers trying to stretch their budgets.”